Liam Dann: Covid 19 coronavirus - This week one of biggest in NZ's economic history

Hairdressers and barbers will be able to work again in level 2. Photo / 123RF

This week is shaping up as a one of the biggest in New Zealand's economic history.

It starts on Monday with a crucial Cabinet decision on moving to alert level 2, which could end our lockdown and allow many businesses to finally get back to work.

If we do come out of lockdown next week it will be a fortnight earlier than the best-case scenario presented by Treasury in its forecasts last month.

That would be something to celebrate.

On Wednesday there's the small matter of a Reserve Bank monetary policy statement.

Economists are picking we'll see the bond-buying programme (quantitative easing) doubled to $60 billion - just to keep interest rates at record lows.

Then Thursday we get what might be one of the most unorthodox government Budgets we've seen.

Finance Minister Grant Robertson has talked up a the notion of rebuilding a new-look economy.

But then he's also talked down the prospect of doing too much too soon.

I suspect we'll hear plenty of vision and not too many specifics for now.

We are likely to see more targeted support for business and we'll be promised there is plenty more to come over the next several months.

That's all good. It may also be cause for some comfort.

But for all the big news next week, nothing can provide certainty.

The outlook for the country and the world remains highly volatile while the Covid-19 pandemic remains in full force.

Finance Minister Grant Robertson during the All of Government Covid-19 update. Photo / Mark Mitchell

Talk of economic recovery might finally have some substance to it if business can get back to work soon.

We just shouldn't pretend that it will be much more than survival for many in the first instance.

Those of us not at the coal face will need to temper the sense of jubilation about haircuts and eating out because the really tough part of this economic cycle is still ahead.

The coming months will lack much of the drama and history of the past couple.

There's a risk they'll also lack the sense of solidarity and camaraderie as the cold economic reality bites through winter.

Last week, headlines about firms falling over and large-scale redundancies brought bad memories of past recessions.

More than 100,000 homeowners have sought some sort of mortgage relief from their bank.

More than 1.7 million people are on government wage subsidies.

The unavoidable bad news is we're facing one of the toughest recessions in our history.

It might be a cold comfort, but the fact there is some historic context for the scale of downturn I'll take as a positive.

Six weeks ago nobody was sure what was going to happen.

There was a moment - as with the GFC- when nobody knew if credit markets would hold, if the whole system was going to come crashing down.

But they did, it didn't and now we're facing a world full of uncertainty - but one which at least appears to have recognisable boundaries.

If I had to make a call right now – based on all the latest economic forecasts - I'd say we're looking at something tougher than the GFC but not as devastating as the financial crash of 1987 was - in this country at least.

Many businesses will open again under level 2. Photo / 123RF

Comparisons to the global financial crisis are fresher but, finance company collapses aside, New Zealand wasn't really hit so hard by that shock 12 years ago.

The fallout from 1987 was much worse.

New Zealand was completely unprepared for what elsewhere in the world was a relatively short sharp shock and economic contraction.

Ordinary Kiwis had piled their savings directly into the share market. Highly leveraged companies toppled over.

The productive end of the economy was still reeling from the removal of tariffs and subsidies but did not yet have the benefit of booming markets in China and South East Asia.

Government debt was too high to allow any meaningful assistance.

Inflation was too high to allow interest-rate relief.

New Zealand dipped in and out of recession for five years. Unemployment rose from 4.2 per cent, peaking in 1992 at 10.7 per cent.

Westpac's latest in-depth economic outlook is a sobering look at what to expect in the next few months.

Using a base case of New Zealand escaping lockdown, it's picking unemployment to rise to 9.5 per cent - the worst in 27 years.

It's a different crisis. A deeper shock in the short term but with more government support and - hopefully - much more rapid rebound as the virus threat fades.

That we're much better placed as a nation to respond this crisis has been written many times.

Regardless, the next few months are going to be a shock to the system for many New Zealanders.

They will be a test of our strength and resolve. They will be a test of our kindness and compassion.

Perhaps by this time next week the nation will be back in business.

We can and should turn our attention to rebuilding a smarter economy, to adapting, reshaping and seizing new opportunities.

And we should get haircuts and spend some money getting out and about if we can.

But we'll need to brace ourselves for hard times.

We're in this together. And we're not through it yet, by any stretch.