Covid 19 coronavirus: Kiwi economist warns New Zealand closures may bring recession worse than Australia

New Zealand’s Covid-19 lockdowns may cause a deeper recession than Australia, said a senior economist at Westpac.

The warning comes as New Zealand faces an economic recession even more severe than the first part of the Great Depression of the 1930s.

Michael Gordon, a senior economist at Auckland-based Westpac, says the bank expects official figures for next week to show a contraction of 11.5 percent for the June quarter, a level more severe than the record decline in the 7 percent in Australia during the same period.

New Zealand’s gross domestic product fell 1.6% in the March quarter, as Australia’s economy contracted just 0.3%, despite the devastating wildfires of the summer.

In 1932, at the height of the Great Depression, the Kiwi economy plummeted seven percent in one year.

If the recovery does not materialize in the September and December quarters, New Zealand could suffer a recession even worse than 88 years ago.

Westpac’s Gordon told Daily Mail Australia that New Zealand’s Alert Level 4 lockdown had effectively shut down a third of the economy in April.

“The closure of Covid-19 was one of the most extraordinary events in New Zealand’s economic history,” Gordon said.

“Such a massive change inevitably comes with a wide margin of uncertainty.”

The dramatic lockdown from March 25 to June 8 was one of the strictest in the world, as part of an elimination strategy.

Auckland was again blocked last month and left on August 31.

By comparison, Australia’s states and territories implemented more moderate stage 3 restrictions, shutting down non-essential businesses like cinemas, nightclubs, gyms and restaurants.

Unlike New Zealand, Australia allowed restaurants to offer takeout meals from the end of March.

More recently, the state of Victoria has resorted to Kiwi-style restrictions, while allowing restaurants to offer takeout.

During the June quarter, the UK economy contracted 20.4 percent, the United States economy fell 9.5 percent, French GDP contracted 13.8 percent and the Canadian economy it sank 11.5 percent.