With the pandemic on many of us are in lockdown mode and wondering how to re-imagine our lives and our businesses when the health risks can be mitigated more easily. If you are in NZ we are trying to “flatten the curve” by limiting the spread of the covid-19 virus to a level at which the hospital system can cope.
This week we are just over half way through a one month lockdown period and testing and other indicators seems to show that the virus is managed for the moment. This increases the likelihood of moving from Level 4 to a lower level which would allow some of us to go back to work and/ or school albeit with some restrictions.
The health impact of this virus is very difficult but the one that will affect everyone is the economic effect on our work and our daily lives.
Some sectors of the economy such as offshore travel and large scale events and even many kinds of in person retail will need to reconfigure dramatically. The idea of an airline cutting 80% of its flights and cutting thousands of highly qualified pilots would have been unthinkable not so long ago.
It seems likely that NZ will have border control for quite some time and we may be relatively safe but ultimately until a vaccine is available we have to rethink the economy. NZ is an country that has a higher percentage of export business than many others.
“Tourism is our biggest export industry, contributing 21% of foreign exchange earnings“. The numbers are all large and while some of domestic tourism will still be possible it will take time to re-configure and transition. As our second largest export earner at $16-20b depending on when the measurements were made. The sheer number of people working in the tourist sector is more than 230,000 and could be as high as 400,000 when the general hospitality sector is added in.
So if your business is part of the hospitality sector such as a restaurant or some kind of people business this is going to be an extremely difficult time.
If your business is part of the dairy or meat export sector you may be better placed if your customers still have the ability to pay. OTOH some of those export customers are likely to be restaurants in other countries and so more than 50% of NZ’s export business is impacted to some extent.
Given that most of the planet is heading for a global recession all export sectors ( including wines, horticulture and forestry) will be impacted. Each sector will have their own experts on what can be done.
The Tech sector (which in 2015) was around $6b in export earnings is likely to increase and grow faster in the next few years as all NZ businesses look to do more ecommerce and “contactless” deliveries. Note: as part of the online economy myself for 25 years now I am busy helping on this.
However what comes next in the economy may not just be the same as it was with just more online…
In NZ Level 4 is about essential businesses remaining open. Those are supermarkets, medical and transport related such as service stations. That also includes some food businesses that have well developed online capabilities like some bakeries and that custard square place in Timaru.
I’m not sure that being able to get some food items is essential but it does make the quality of life more enjoyable. The more interesting question is what is an essential business and how can your business transition into what what is likely to be a restricted economy of some kind.
It may well be that the nature of the economy will morph somewhat into becoming less of a consumer based thing. For example the US economy is thought to be around 70% domestic consumption driven while China is only 40%. That has huge implications for the recovery and what sectors might change the most in order to survive and thrive.
In the US the gig economy which is another name for part time workers with no real social protection is very much imperilled. But because of the shortages of staff in essential sectors now some of those staff are being given workers protections like sick leave.
One of ideas in that article is that society at large may decide to revalue contributions made by different groups and help ease some of the inequalities (or not.) Some jobs may no longer be worth doing.
In How the Virus Transformed the Way Americans Spend Their Money We see some of the impacts.
“All of the charts in this article are based on a New York Times analysis of data from Earnest Research, which tracks and analyzes credit card and debit card purchases of nearly six million people in the United States. While the data does not include cash transactions, and therefore does not reflect all sales, it provides a strong snapshot of the impact of the virus on the economy.”
Even allowing for the somewhat peculiar way that the US differs from other economies I would expect some of the same effects. In NZ we have more of a social security safety net and we can get stats from the eftpos vendors which would be better quality than just a credit card based set of stats.
But in NZ too if we factor in that many jobs will not survive then the spending power of consumers in the local market can only sustain a certain level. The 4 week lockdown is painful but it is a sprint and what we need to be thinking about now is how to run a new kind of business marathon with changed rules and new challenges.
Note: The graph shows Chinese tourist numbers in NZ NZ second largest source of tourists after Australia.
