Pandemic would cut NZ economy

Severe pandemic influenza is likely to immediately reduce New Zealand's economy by 5 to 10 percent, a senior economist says.
"A severe pandemic has similar estimated first year impacts to the 1931-1933 Depression, but much smaller cumulative impacts over four years," said economist Brent Layton.
The cumulative reduction in real gross domestic product (GDP) over four years was estimated to be equivalent to 15 percent of one year's GDP, they said. Unlike other types of economic shock, the impacts of a human influenza pandemic, beyond the direct human illness costs, would be both supply and demand and driven by the effects on workers - labour supply, supply chains, consumer demand, investment, international trade and travel, financial system and stability and economic growth.
Last December, a Treasury officials warned that bird flu pandemic would cost the economy $15-30 billion in the first year and up to $40 billion over four years, and economic recovery would take years.
Normally, the risk of flu pandemic is considered 1-2 percent over any one year, or 20-30 percent over 20 years, but Treasury quotes Australia's Chief Medical Officer as putting the odds of a pandemic over the next few years at one-in-10.
The World Health Organisation (WHO) has warned the risk of an influenza pandemic on the scale of the "Spanish flu" outbreak in 1918 has been raised by the emergence of a highly pathogenic strain of avian influenza in Asia, H5N1.
If this birdflu mutates so it can be transmitted from human to human, the risk of a pandemic is seen as high by the WHO.
Under the most severe scenario, the Ministry of Health estimates up to 40 percent of the population could contract influenza, with 2 percent of those infected dying. This could result in up to 33,000 deaths and Treasury and other economists have said the economic impacts would be substantial.
Mr Layton said the human illness costs, would include medical treatment, labour productivity losses and "intangibles" such as disruption to leisure and education, suffering and loss of life.
Immediate effects for the labour market would include workers staying home because they were sick or caring for someone who was sick, or caring for children because schools were closed, or simply trying to avoid infection.
In the longer-term, large-scale deaths might shrink the workforce, and the smaller labour force might have lower aggregate savings and investment levels. Supply chains will be disrupted, with priority given to maintaining services such as electricity, water, sewerage and waste management, telecommunications, transport, and essential services.
Consumer demand and investment could drop because many people would drop social activities to avoid infection, especially in retail, hospitality and other leisure sectors.