15 May 2020

ANZ predicting higher unemployment figures for longer

3:17 pm on 15 May 2020

ANZ chief economist Sharon Zollner says she expects unemployment numbers to remain higher for longer than the government is predicting.

Magnifying glass over Jobs section of newspaper classifieds

Photo: 123rf

In yesterday's Budget announcement, Treasury revealed its forecasts predict unemployment will more than double, surging to a peak 9.8 percent by September this year.

"This is the rainy day we have been preparing for - now we must weather the global storm," Finance Minister Grant Robertson told Parliament yesterday.

According to its figures, Treasury had various predictions on when the unemployment rate to drop back to pre-Covid levels.

According to it's main Budget 2020 forecast, unemployment would return to pre-Covid levels by 2024, while a full Covid-19 Response and Recovery fund scenario would bring unemployment back to 4.2 percent by 2022.

However, Zollner told Morning Report those figures don't match what ANZ is predicting.

"There does seem to be quite a lot of optimism that the labour market will return back to something close to normal quite quickly, largely perhaps as a result of the government's efforts in the Budget.

"We on the other hand do see it (unemployment) lifting up to 11 percent, which is not that much higher than Treasury has it, but then holding up longer because of that need to retrain and move resources around the economy, that's very difficult to do that quickly," she said.

Read more about the 2020 Budget:

Zollner said ANZ is forecasting unemployment won't reach pre-Covid levels until another year after Treasury's prediction.

"Probably more a three to four year horizon than a couple... I'd be happy to see that (pre-Covid unemployment levels) by 2023, I'd consider that a pretty good outcome, this is a massive economic shock," she said.

ANZ chief economist Sharon Zollner.

Sharon Zollner. Photo: RNZ / DOM THOMAS

On top of unemployment concerns, Zollner said reducing New Zealand's debt level will be high on the list of priorities.

Expenses are set to mushroom as the government spends up to $50bn on Covid-related related relief measures, infrastructure, housing and industry support programmes.

The net debt level, once sitting at 20 percent of GDP, will hit a peak of 53.6 percent in 2023, but is projected to sit above 40 percent well into the 2030s.

"We certainly should bear it (debt level) in mind," Zollner said.

"It's easier to throw money around than it is to scrape it up off the floor again and basically we are going to face some really difficult challenges down the track deciding how we are going to do that.

"But fortunately we do have this good starting point (20 percent debt level prior to Covid-19) so we can push that day of reckoning out a little bit further whereas some places like Europe, they're having to address that right from the get go.

"It's not helpful to talk about austerity in the middle of a crisis, even raising the prospect of higher taxes down the track will make people want to save more money today, but it is something that the longer we put off addressing it, the harder it's going to be."

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