Black Swan - She's going to be a rough ride ahead
Posted: 21-Apr-2020 |
ANZ are calling Covid-19 and its subsequent financial impact 'a black swan event' which is a metaphor that describes an event that comes as a surprise, has a major effect, and is often inappropriately rationalised after the fact with the benefit of hindsight.
They lead their current Economic Outlook report by saying "The world is in the midst of an unprecedented health and economic crisis. The COVID-19 pandemic is wreaking havoc on lives and livelihoods, including here in New Zealand. Unprecedented activity restrictions have been absolutely necessary, but have stopped the global economy in its tracks. The economic slump underway is truly enormous. Rightly, the crisis has galvanised policymakers with governments and central banks taking unprecedented steps to cushion the blow and ease pressures in financial markets. Nonetheless, the impacts of this crisis will be with us in months and years to come."
Depending on how long the crisis continues, including lockdown, global spread of the virus and continuing current trends, their prediction for the years ahead include unemployment levels to increase to 11%, house prices to fall 15%, retirement age to increase and GDP to be 8-10% lower this year.
But, they do add that New Zealand is resilient, and has come into this crisis with a lot of advantages: We have been in a position to respond to the outbreak quickly; we produce a lot of essential goods domestically and our exports are still in demand; we have a well-functioning health system and government; we have plenty of fiscal firepower to respond; the financial system is resilient; and the exchange rate and monetary policy can provide a buffer.
The report finishes by saying - We will get through this. And as the economy returns to its new normal, new opportunities will emerge. There will be scope for strong growth over the longer term as the economy replenishes its productive capacity. New businesses will be formed, jobs will be created, and there will be scope for efficiency gains and new opportunities, even if it is a slow recovery and a difficult road at times.
One of the defining features of "black swan" events is that they have the potential to reshape and redefine our world. The economy might not look the same after this, but we will move forward to a different – and positive – future in time.