A step back to normality

Nigel Tutt
Chief Executive of Priority One

The recent announcement about the opening of the two-way trans-Tasman travel bubble provides us with some interesting implications for the New Zealand economy.

The travel bubble is the first major step in a return to a more normal world, following the elimination strategy that both countries have pursued throughout the pandemic so far, it’s a step that we must make at some stage. While we can all visualise holidays on the Gold Coast or Queenstown, or visiting relatives on either side of the ditch, the economic implications are more complex and not entirely clear at this stage.

We would expect a bit of a bump up in international tourism spend. This will be less pronounced in Tauranga, but will certainly benefit other areas of the country like Queenstown and Rotorua. 

A recent Tourism New Zealand study showed strong intent for Australians to visit our country when borders are opened up, which is great news.

This boost in tourism spend will be somewhat offset by Kiwis travelling to Australia themselves however, and I expect it will take months before we get large volumes travelling either way.

The effect on domestic spend is more likely to cause concern. Consumer spend is doing relatively well considering the pandemic, only about 3 per cent down on the previous year despite serious headwinds. People have tended to spend on higher-end goods, clothes and treats in the absence of being able to splurge on an overseas holiday. That is unlikely to be the case this year.

Migration is another interesting area, with some risk that Kiwis take up opportunities to move across the ditch. Our rapidly increasing housing costs do not help this. Australia is not immune to rising house prices but generally has lower housing costs and higher wages than New Zealand, leading to better affordability. This migration would leave skill gaps and while the bubble should free up MIQ space for external migration from other countries, excess capacity will be decommissioned instead. 

Our closed borders and elimination strategy have served us well to this point. While the effects of opening borders up are uncertain, it is a great first step back to normality.



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