While job losses at big businesses like Air New Zealand and Fletcher Building make the headlines, one economist says most of the cuts will be across small businesses.
Fletcher Building announced on Wednesday it's laying off 10 percent of its employees - about 1000 workers - while hundreds of Air New Zealand cabin crew were also told they would be losing their jobs.
Wednesday's announcements come as the economic repercussions of COVID-19 and the subsequent lockdown bite. Infometrics warned on Thursday that New Zealand will experience the "greatest economic shock in a century" with 250,000 job losses possible over the next year or two, while the Treasury forecast last week unemployment would peak at just under 10 percent in September.
But economist Shamubeel Eaqub says while moves by big companies act as "signals of what is happening in the wider economy", there are a lot more losses across small businesses.
"We are seeing the headlines in the big businesses, but small businesses are also shedding jobs. But they will be shedding in ones and twos, which don't make the headlines, yet that is where most of the cumulative job losses are going to be."
Tourism and hospitality are expected to be hit the hardest due to border closures and restrictions that remain on gatherings. The Government has attempted to cushion the blow with schemes like the wage subsidy, extended for businesses that can prove a 50 percent reduction in revenue in the 30-day period prior to application compared to the same period last year. Tourism also received a $400 million package at the Budget, though that has had a mixed response from the industry.
Eaqub said every sector will be affected.
"It is actually going to be much more widespread than that. Because the recession is just so deep and so broad we expect almost no industry to be untouched, but the maximum pain is probably going to be in the tourism and hospitality [sectors]. The minimum kind of pain would be in the utilities, Government end of town," he said.
Not every Kiwi will lose their job, but it's the uncertainty created for workers that is a big worry as it affects their willingness to spend and stimulate the economy.
"There is still a fear factor for most of us. We lose job security, we lose security in terms of our hours, in terms of our incomes, and that is what causes us to be more careful. Whether it is about buying big things like furniture, or luxury goods, or discretionary stuff, or houses, all that stuff really does get pushed back," Eaqub said.
"During recessions, banks tend to become more careful about how much money they lend and at what sort of risk."
That could explain why some in the construction industry - such as Fletcher Building - are bracing for a prolonged drop in revenue.
"When we get fearful of the economic outlook, we stop investing and making big decisions. It means building houses, buying houses, investing in our businesses. So, we tend to see quite a widespread slow down across the economy. The investment sector, particularly in construction, tends to get big swings. Very strong highs during booms, and very low lows during recessions."
For borrowers or Kiwis looking to refix their mortgage, "extraordinary" low interest rates will be helpful, Eaqub said.
"It is going to be really, really beneficial, not only for people who are looking to borrow, but people who already have debt are now going to be refixing their mortgages, and this will give them a real opportunity to, well, maybe reduce their payments, but more beneficial would if they can reduce their principals," he said.
"This is what we saw during the… last recession. When interest rates fell sharply most people maintained their payments and that made sure they were able to repay their mortgages faster and get out of debt quicker."
