New modelling from the Treasury has painted a dire picture of New Zealand’s economic prospects for the next year, with a surge in unemployment to as much as 13% even if Covid-19 infections are contained and lockdown rules eased after the initial four weeks.

A jobless rate of up to 26% – and a fall in GDP of 23% – is predicted if the country is forced to remain in its strictest level of shutdown for a total of six months before moving to marginally lighter measures.

However, with a larger fiscal stimulus package than the NZ$20bn (£9.7bn) already pledged by the government, the 13% jobless rate modelled could hit a much lower peak of 8.5% before falling to 5.5% in the year to June 2021. On Tuesday, Robertson pledged to release further support.

All seven of the scenarios modelled – the first released since the pandemic reached New Zealand – predicted that unemployment would be higher in the June quarter of this year than the 6.7% reached during the 2008 global financial crisis. The current jobless rate is just over 4%.

The models “should not be taken as any guide as to the government’s thinking or decision on changing alert levels”, said Grant Robertson, the finance minister, referring to the four-tier alert system that determines the strictness of its Covid-19 response.

He told the parliamentary committee scrutinising his government’s coronavirus response on Tuesday that unemployment could be brought “under 10%” and then reduced to the same levels as recent years “with solid government investment”.

New Zealand could return to pre-pandemic economic levels by 2024 “with significant loss of income along the way”, Caralee McLiesh, the Treasury secretary, told the committee. Her agency’s models predicted GDP losses of between 0.5% and 23.5%, depending on the strategies pursued in New Zealand and the fate of the global economy.

The figures were issued as New Zealand’s government considers whether to remove the most restrictive lockdown measures from the country next week, dividing public health analysts. Under current rules, people can leave the house only to access groceries or medical help, or to go for a walk, unless they are essential workers.

The lockdown, which began on 25 March, is due to last at least four weeks.

New Zealand recorded four deaths from the virus on Tuesday, the country’s deadliest day. Nine people have died and 15 are in hospital, three of them in intensive care. One person is in a critical condition.

Seventeen new cases of the illness were announced on Tuesday. The total number of cases in New Zealand is 1,366.

David Skegg, an epidemiologist from Otago University, warned the committee that the government would be “playing Russian roulette” with people’s lives if it eased the most stringent lockdown restrictions next week without ensuring contact tracing and testing for the virus was up to speed.

The lockdown was like “pressing the pause button on your device,” he said, but was not enough on its own to eliminate the virus from New Zealand.

Jacinda Ardern, the prime minister, is due to make a decision with her cabinet next Monday about whether the lockdown should be lifted to a less restrictive suite of measures on Thursday.

Shamubeel Eaqub, an economist who earlier in April urged the government to provide more and clearer data about the country’s financial and employment prospects, said Tuesday’s models were “a very good start”.

The best-case scenario modelled by the Treasury and resulting in 8.5% unemployment was the most likely to happen, he said.

Meanwhile, the country’s struggling media sector will lose 200 more jobs as the company NZME – which owns the New Zealand Herald and a radio network – announced layoffs on Tuesday. Some 237 people lost their jobs last week when the German media company Bauer, which owned New Zealand’s largest magazine titles, abruptly shut up shop in the country in early April.

The government is expected to announce measures this week to help curb media losses. NZME joined the television and radio company Mediaworks in asking staff to take pay cuts as the pandemic slashed advertising revenue.



