May 07 2020
New Zealand is expected to take another step towards reopening their economy next week, with the country transitioning from Alert Level 3 to Alert Level 2. Under the updated restrictions, industries across New Zealand that are expected to begin reopening include schools, domestic travel, food outlets, hairdressers and sporting events. New Zealand has had remarkable success in containing the spread of COVID-19, seemingly achieving an elimination of the virus.
Industries to Reopen
Multiple industries are expected to reopen next week, including the Cafes and Restaurants, Hardware and Building Supplies Retailing, and Clothing Retailing industries. However, social distancing restrictions are expected to remain in place, such as minimum table distancing and a cap on the number of customers allowed inside an establishment at one time. Social distancing will require at least one metre distance between patrons. Contact tracing systems will also be required for businesses to reopen, where records are kept of who was in the business and when. A reopening of these businesses is anticipated to signal to consumers that public areas are now safe to return to, encouraging a recovery of retail and hospitality demand. In the short-term, pent up demand from the lockdown period is expected to lead to a surge in retail activity. However, weakened economic conditions are expected to hinder these industries for the remainder of the year. Revenue in the Cafes and Restaurants industry is expected to decline by 25.1% in 2020-21, to $4.6 billion.
The Gyms and Fitness Centres industry is also set to reopen. Revenue in this industry is projected to decline by 20.9% in 2020-21, to $380.7 million. Most gyms have not charged fees during the period forced closure. A sharp decline in economic conditions is expected to force many consumers to cancel gym memberships, slowing the recovery of this industry. The industry is expected to make a profit loss in 2020-21. The resumption of exercise is important for the health of New Zealanders. High-level sporting events are expected to resume, including NZ Super Rugby and ANZ Premiership Netball professional leagues. However, these events will continue to be played in empty stadiums due to restrictions on gatherings of more than 100 people.
Some businesses that require close personal contact, such as the Hairdressing and Beauty Services and Physiotherapy Services industries, are also set to reopen. These industries will require strict hygiene practices and robust contract tracing. Specific guidance for key sectors is currently being developed by the Ministry of Business, Innovation and Employment (Hikina Whakatutuki).
Domestic travel around New Zealand is also expected to resume in May. This decision is expected to provide a lifeline to the Tourism sector, which has been significantly disrupted by the ban on international travel. Revenue in this sector is expected to decline by 16.1% in 2020-21, to total $34.9 billion. Inbound tourism will remain banned for the foreseeable future due to the risk of reintroducing COVID-19 from overseas. Prior to the COVID-19 pandemic, domestic travel accounted for 43.0% of revenue in the Tourism sector. The resumption of travel between Australia and New Zealand may be possible, if the governments of both countries can come to a bilateral agreement.
The reactivation of industries will provide key information for other countries that have yet to reopen their economies. If COVID-19 resurges in New Zealand due to relaxed lockdown restrictions, it may lead other countries prolonging their lockdown measures. However, the successful containment of COVID-19 is expected to enable New Zealand to return to normal economic conditions at a faster rate than countries that have yet to control the spread of the virus, such as the United States.
IBISWorld reports used to develop this release:
- Cafes and Restaurants
- Hardware and Building Supplies Retailing
- Clothing Retailing
- Gyms and Fitness Centres
- Hairdressing and Beauty Services
- Physiotherapy Services
For more information, to obtain industry reports or to arrange an interview with an analyst, please contact:
Strategic Media Advisor – IBISWorld Pty Ltd
Tel: 03 9906 3647