Overall, businesses faced much less disruption and fared better during the latest Omicron outbreak than in the previous major lockdowns, says ASB Chief Economist Nick Tuffley.
As a result he believes many are now in a position to plan more accurately for similar waves which he says are likely in the future.
"Let's reflect on the lessons we get out of how we've coped with the Omicron wave and the two years of being in bunkers and hibernation," he says. "Let's start looking ahead strategically and where to take businesses now that we don't have to focus quite as much on surviving."
He says there has been a shift to essentially businesses and individuals deciding what risks they are prepared to take for themselves and for their staff in terms of health and safety and wellbeing.
"One key thing we can learn is that when we see future waves of Covid – and that's likely because the pandemic is not over yet – the impacts on the economy are likely to be fairly similar to what we have just been through.
"Any further impacts (of Covid-19) are likely to be milder than what we have seen during 2020 and 2021. The impacts will be relatively short-lived, and there's a lot more stability and less uncertainty in this business environment – that's really key for planning and moving forward."
Tuffley, who has been ASB's chief economist since 2007, says the country is starting to get back to business as usual with the economic cycle beginning to appear again. He believes there will be encouraging developments with the border opening up and more people eventually coming in and available for employment.
There will be more tourists. "We are going to see those sectors that have been under pressure - essentially hospitality and tourism - having a lot more life. Those businesses have done it pretty tough over the past two years."
Unemployment will fall to a fresh record low of around 3 per cent, and wage growth is expected to accelerate to its highest annual rate since the global financial crisis (in 2008) and become more broad-based in 2022.
Tuffley warned the phased relaxation of border restrictions could tighten the labour market further as Kiwis head offshore on a belated overseas experience (OE) and take advantage of the higher wages on offer.
However, the opening of the New Zealand labour market to non-visa waiver countries by the end of the year should subsequently alleviate labour shortages.
ASB predicts the Reserve Bank will hike the OCR (Official Cash Rate) 50 basis points to 2 per cent in May, followed by a series of 25 basis point rises to its peak of 3.25 per cent in early 2023.
"We then expect the Reserve Bank to unwind OCR hikes from 2024, with the OCR ending 2025 at around 2 per cent," Tuffley says. "Increasing labour market slack will potentially open the door to OCR cuts in a couple of years."
He says business confidence took further hits as Omicron started spreading, but sentiment has started to tentatively recover now the peak of the outbreak is past.
Tuffley says there was a sprinkling of mildly encouraging signs "to keep our forecasts in play for low, but okay, gross domestic product growth, and a slow easing in headline inflation from the likely peak in the first half of 2022."
Employment and investment intentions did ease marginally in April, albeit the former might be related to recruitment fatigue rather than a dropping in genuine employment intentions, he says.
New Zealand consumer sentiment fell to a record low in March, though has since lifted a touch. Tuffley says "we expect further modest improvement given the declining nationwide Omicron outbreak and the shift to (less restrictive) orange traffic light settings."
Nevertheless, consumers continue to be pinched by soaring inflation. Tuffley says it could peak at 7 per cent in the June quarter and is unlikely to fall below 3 per cent until 2024.
Annual inflation reached a 30-year high of 6.9 per cent in the March quarter – slightly lower than market expectations.
But Tuffley says the big issue is not so much what the inflation peak will be but how persistent the uptick in inflation is. "We remain wary of a more pronounced and persistent lift in inflation."
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