Economists are reacting pessimistically to news that almost all travellers to New Zealand will need to self-isolate for 14 days, with one saying "a recesssion is inevitable".
Prime Minister Jacinda Ardern announced the new travel restrictions this afternoon, saying they were among the strongest in the world.
As well as the new travel rules, Ardern said all cruise ships were banned from coming to New Zealand until at least June 30.
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"We must go hard, and go early, and do everything we can to protect New Zealanders' health," she said after a full Cabinet meeting today.
The new measures, she said, are aimed at stopping the spread of Covid-19, which has now infected 130,000 people around the world and six in New Zealand.
Although they will help limit the spread, the new travel restrictions will have a significant impact on New Zealand's economy, according to top economists.
"A recession is inevitable," said Bagrie Economics chief economist Cameron Bagrie.
"The question now is how bad."
Even before Ardern's announcement today, New Zealand banks were predicting the economy would go into recession as a result of the Covid-19 pandemic.
The new travel restrictions will severally impact tourism – the biggest section of New Zealand's economy.
According to the Tourism Industry Aotearoa, tourists in New Zealand collectively spend $112 million a day.
Senior Westpac economist Satish Ranchhod said the loss in revenue will flow into areas such as the hospitality sector.
"Hospitality workers, in particular, are at risk of losing their jobs."
And the longer these restrictions stay in place, the harder the economy will be hit, he said.
Bagrie agreed, adding that there is going to be "economic carnage".
ANZ Chief Economist Sharon Zollner called the decison "a body blow to tourism to lessen the odds of a king hit" to New Zealand's economy and people.
On Tuesday, Finance Minister Grant Robertson will unveil a stimulus package designed to help support the economy through the downturn.
Bagrie said given the economic impact of the restrictions, the stimulus package has to be large and needs to be ready to be rolled out fast to "mitigate some of the collateral damage, which is going to be huge".
Infometrics economist Brad Olsen agreed that a lot of money will be needed – "a comprehensive fiscal stimulus [is] needed as soon as possible".
"The impacts of the pandemic response could quite possibly be a steeper hit to the economy than the GFC, although the recovery is also likely to be swifter."
Meanwhile, the new travel restrictions could mean some MPs will need to self-isolate.
The Herald understands National MP Kanwaljit Bakshi is in India for a funeral and is unlikely to be back before the new restrictions kick in.
In a statement, National Party leader Simon Bridges said it was good the Government was treating the pandemic with more seriousness and urgency.
"We also want to work with the Government to see much more testing and other health-related measures, such as the urgent gearing up of our health system for the many patients coming."