Westpac Institutional Bank Team
Westpac Institutional Bank
The novel coronavirus outbreak has stolen the show over the past week. New Zealand has announced that it will deny entry to all foreigners travelling from China. The ban is currently in force for two weeks, but we can only really see two possible outcomes – either the travel ban lasts much longer, or the coronavirus arrives in New Zealand and the authorities give up on ideas of quarantine. China accounts for 12% of visitor arrivals and is the largest source of overseas students, so this is going to take a serious toll.
Forestry is also heavily affected. 80% of New Zealand forestry exports go to China. As manufacturing in China has slowed due to the virus, log shipments out of New Zealand have suddenly been cancelled. Log exports out of New Zealand have ground to a standstill. Soon logs will start piling up on New Zealand wharves, and the next step will be a sudden reduction in harvesting activity with consequences for employment.
For many other export products we are seeing sudden declines in price as Chinese demand dries up. Crayfish prices have dropped by a third and last week's dairy auction saw prices drop 6%.
The economic impact of the coronavirus is wildly uncertain, but it is now obvious that we are looking at something more severe than SARS. China is much more important to the New Zealand economy than it was in 2003, and the efforts to limit coronavirus via quarantine have been more draconian.
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