Signs of euphoria appear to be surfacing in the New Zealand landscape, while the economy is clearly headed towards a
more profound revival of operations with phased removal of lockdown restrictions. The government, as a part of its
staged reopening plan, indicated that the decision on shifting to Level 2 Alert would follow the cabinet review on
Monday, 11 May 2020.
A sharp decline in the infection rate is boosting confidence for lockdown lifting while paving the way for economic
restoration. The Ministry of Health reported no new Covid-19 cases or deaths for the first time on 4 May 2020 since the
strict countrywide lockdown started more than a month back.
Life under the reformed less-intense restrictions at Level-2 is expected to be more outgoing and sociable with the
expected reopening of public venues, schools, and domestic travel. Furthermore, although mass gatherings will reportedly
be impermissible to evade the second wave of infection, the gathering size may increase with protocols in place to
record the attendee’s details. Meanwhile, the business activities may soar with the customers back in action.
Given the backdrop, let us have a closer look at how the upcoming Level 2 is anticipated to play a considerable role in
opening avenues to kickstart the economic activities and overriding the cynical theories through a more realistic
approach.Reboot for the Kiwi Economy
The government has already deployed several fiscal and monetary measures to soften Covid-19 blow and evade economic
meltdown. Level 3, which was primarily about economic reopening, has seen snowballing in economic activities, which are
further expected to spike under the eased restrictions.
The retail sector seems to be picking up some momentum under Level-3 alert with online retail sales recording an
increase of over 300 percent in some businesses. Alcohol sales has surged in the Level-3 alert; however, the hospitality
and electronic transactions are still reeling through the pandemic effect.
The trade digitization along with demand rebound is expected to give a positive nudge to the advancing business
operations in the eased alert level, expectantly disposing of the severe economic fallout chances.Lens through the Theory Vs Realistic Approach
Market players are closely eyeing the economy recovery rate for gauging the revival of the business operations. The past
historical evidence when studied in the light of new tech regime suggests that the economy is bound to start back with
potent force, although sustainability of the current virus containment success and the possibility of the second wave of
virus outbreak is to be closely monitored.
The predicted rise in unemployment rate, however, remains one of the major concerns for the policymakers. The
government, through the varying tax reforms, wage policy and other significant policy initiatives, is putting efforts to
ensure the revival of the small and medium-sized businesses.
Undoubtedly, multi-policy approach is considerably required for preventing the grim economic situation in the future.
The fiscal reforms coupled with monetary policy initiatives are expected to accentuate the employment opportunities,
though some sort of headwinds may be observed in the job sector till the time businesses are not able to establish their
footprint back in the market.
The market believes that the effective restructuring of the debt system, new economic paradigm and the trade revival
bear the potential to beat down the impending debt crisis.
Besides, socioeconomic reforms through the practical integrated efforts are at the core to restarting the economy.
Leading real estate firm Bayleys is entering into marketing tourism properties through the acquisition of specialist
Resort Brokers business. Meanwhile, Tower Insurance has started helping the customers with restructuring their
insurance, which might be needed considering the financial pressure built in the past few months.Buoyant Market Performance
While the NZ economy has been drawing international attention making great strides in stepping down the Alert Levels,
the equity market seems to be sailing smoothly through the storm. Notably, S/NZX 50 Index has weathered the crisis decently, generating a 6.93 percent QTD return as on 4 May 2020.
The oozing optimistic sentiments with the flattening Covid-19 curve in April sent many stocks rallying during the month
including SkyCity Entertainment Group Limited (NZX: SKC), Restaurant Brands New Zealand Limited (NZX: RBD), and Tourism
Holdings Limited (NZX: THL).
Besides, the investors locked-in their month gains by selling the blue-chip stocks that have surged substantially such
as Meridian Energy (NZX:MEL) and Fisher & Paykel Healthcare Corp Ltd (NZX:FPH).
Several market players tapped the new defensive investment avenue of Online and Tech businesses, including Pushpay
Holdings Ltd (NZX: PPH), and Solution Dynamics Limited (NZX: SDL), among others.
Centric to medical cannabis, Cannasouth Limited (NZX: CBD) has witnessed a sharp rise of 16 percent in its stock price
to $0.50 since 28 April to 4 May 2020. In the same period, stock of electricity generation and retailing company
Trustpower Limited (NZX: TPW) rose by 4.47 percent.
While the NZ economy is gearing up for economic reboot backed by strong policy initiatives, structural thematics and
revival in equity market, people need to stay cautious in practicing social distancing norms amidst eased restrictions
as some economists are largely wary of the second wave of virus.