A leading economist is warning that unemployment is set to 'surge' as the fallout from the COVID-19 pandemic continues.
House prices will also be affected, as the economic shock of coronavirus carries over to the property market, says Cameron Bagrie, managing director at Bagrie Economics.
Although the latest StatsNZ figures from early February show unemployment at 4 percent, Bagrie believes the current figure would be in the "mid sixes" right now - with that number set to climb even higher throughout the year.
"To put that in perspective, unemployment peaked at 6.7 percent during the GFC [global financial crisis] - so we're going to surge beyond that well and truly because we haven't seen the end of this year, layoffs are still coming," Bagrie told The AM Show on Monday.
Already, multiple companies have announced they are cutting staff as they struggle to stay afloat, with others already folding.
Air New Zealand has forecast a minimum of 3750 redundancies over the next year while Bauer Media - publisher of magazines like The Listener, Woman's Day and Metro - shut its doors earlier this month, with all staff let go.
One scenario modelled by Treasury forecast that unemployment could climb as high as 26 percent if the current nationwide lockdown is extended for more than the four weeks initially planned. The Government is set to announce its decision over whether that will happen or not on Monday afternoon.
Currently only essential businesses are allowed to open, which has had a crippling effect on many companies trying to stay afloat with no income.
Although Treasury predicted that unemployment could be kept under 10 percent if the Government is willing to provide additional financial support and the lockdown is not extended, Bagrie says whatever happens we are in for some tough economic times.
Higher unemployment will almost certainly carry over and affect the property market, he says.
"You start to think about the flow-on effect about what that's going to mean for the property market - the property market is going to be very weak, house prices are going to fall to back up 2020."
Bagrie said the "ballpark figures" are that house prices could fall by 10 percent by the end of the year, with unemployment hovering around 11 percent.
"But this is all subject to going back down the order to a 3, a 2, an alert level 1 - but what we can safely assume is that life's not going back to what we would call somewhat normal."
He said there's "no way" it will be a V-shaped recovery - where the economy bounces back strongly after a clear downward trend - as some economists have predicted.
"This is not a V this a U [shaped recovery] at best," he said.
The Government has already poured billions of dollars into the economy to stimulate growth and stop businesses from folding, but many experts have warned even more will be needed in the long run.
Finance Minister Grant Robertson last week warned the country was in for a "once-in-a-century shock" to the economy and said the Government needed to "do what it takes to get New Zealanders through this and allow us to kickstart the economy on the other side".
