Answer to Question #210195 in Macroeconomics for Anisha Kumar

Question

Discuss in an essay (150 words) form the key macroeconomic effects of COVID19 (ignore health effects) on New Zealand. Identify how this economy can promote economic growth given the pandemic. Identify three macroeconomic policy interventions to support the livelihood of people in such an economy.

Answer 1

The worldwide COVID-19 epidemic had a huge economic impact on New Zealand. New Zealand has a mixed economy, which means that it is a free market with some governmental ownership and control. The New Zealand Government established a four-tier alert level system in mid-March 2020, putting much of the country's economy under lockdown beginning March 25 except "essential services" such as supermarkets. Lockdown restrictions on different economic activity were gradually eased on 28 April, 11 May, 25 May, and 8 June due to the effectiveness of the government's eradication plan.

The New Zealand economy officially entered a recession on September 17, 2020, with the country's GDP fell by 12.2 percent in the June quarter due to the COVID-19 pandemic. The foreign travel restriction and a severe nationwide lockdown harmed the retail, lodging, hospitality, and transportation industries.

Following the effective containment of the virus, the New Zealand economy saw a rapid revival in what is known as a V-shaped rebound, ending the year with an overall economic expansion of 0.4 percent, better than the projected 1.7 percent contraction. Unemployment has also fallen to 4.9 percent in December 2020, from a record of 5.3 percent in September.

New Zealand has successfully implemented an anti-COVID-19 infection campaign focused on rigorous public health measures. Early in the epidemic, these included a severe lockdown, controlled quarantine requirements, a concentration on testing, contact tracing, social distancing, and continued strict travel restrictions. As a consequence, there have been relatively few illnesses and fatalities.

The economy revived significantly in the second half of 2020 when the communal transmission was removed, and lockdown restrictions were lifted. By the fourth quarter of 2020, New Zealand's growth performance was at the top of the Organization for Economic Cooperation and Development.

Macroeconomic policy interventions to support the livelihood of people  are

Through FY2024-25, the government has outlined budgetary measures totaling NZ$62.1 billion (19.3 percent of GDP). The entire sum includes the COVID-19 Response and Recovery Fund, NZ$5.1 billion, set aside as a buffer for a future revival.

The Reserve Bank of New Zealand (RBNZ) maintained the official cash rate (OCR) at 0.25 percent at its May 2021 Board meeting, as well as the Large Scale Asset Purchase (LSAP) of up to NZ$100 billion and the Funding for Lending Program (FLP).

The exchange rate has been allowed to adjust flexibly.