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Australia, New Zealand Ponder Mutual Reopening Once Virus Is Contained

Australia, New Zealand Ponder Mutual Reopening Once Virus Is Contained

(Bloomberg) -- Australia and New Zealand’s prosperity is built on trading with the rest of the world: nimbly negotiating ebbs and capitalizing on flows. Borders are closed but, with coronavirus outbreaks in the two nations’ coming under control, they’re turning to one another.

Winston Peters, New Zealand’s deputy prime minister, kicked off the idea of a “Trans Tasman Bubble” as a way to resume international travel. He said that he’d spoken with Australian officials on the issue, though they were cooler in their initial public responses.

Prime Minister Scott Morrison seemed to have swung round to the idea when he was asked Wednesday about overseas visits. “I can’t see international travel happening any time soon,” he told reporters. “The only exception, as I have flagged, is potentially with New Zealand, and we have had some good discussions about that.”

Australia, New Zealand Ponder Mutual Reopening Once Virus Is Contained

Bloomberg Economics estimates that under an upside scenario, which includes a trans-Tasman opening, Australia’s economy could grow at double the pace next year than under the baseline outlook. New Zealand, similarly, would see a 2020 recession that wasn’t as deep, and its economy would recover to pre-virus levels sooner.

Both Australia and New Zealand are ahead of many other countries on the pandemic curve, allowing them to consider options such as opening to each other. Growth in new confirmed virus cases for both countries has been less than 1% in recent days.

What Bloomberg’s Economists Say

“New Zealand has more to gain. Tourism is a much larger share of New Zealand’s economy, and exports. And Australian visitors arrivals outnumber Chinese visitors to New Zealand by more than 3:1. Given tourism is an industry that is labor intensive, and is regionally dispersed across both economies, restarting tourism flows within a virus-free Trans-Tasman bubble would greatly enhance not just the pace, but also the breadth of the recovery for both economies.”

James McIntyre, economist

Australia is New Zealand’s second-largest trading partner, biggest investor and top source of visitors, while New Zealand is Australia’s 11th largest trading partner and second-largest source of tourists.

Visa agreements see people flow easily between the two nations for work or pleasure. When Australia’s economy is booming, kiwis flock across the Tasman and return home when that reverses. This eases employment short falls on both sides.

Both have enjoyed a huge windfall from China, the top trading partner to each country. China buys Australia minerals and New Zealand’s dairy and meat, as well as driving huge demand to the countries’ education and tourism industries. Closed borders have hurt both and now they must find new opportunities from trading with each other.

The airline industry will no doubt welcome the increased movement of people, as would the sports leagues that involve both countries.

Morrison, in an interview Friday after a meeting of national cabinet, refuted a Channel Nine report that the National Rugby League’s New Zealand Warriors had been given special approval to travel to Australia on Sunday in order to be ready to resume competition on May 28.

Australian border authorities are still working through the issue, Morrison said, adding that the NRL is getting closer, but everything has to be done the right way.

The Tasman bubble could be a launchpad to eventually connect with other countries that bring the virus under control. Based on current cases, the bubble could be expanded to include Singapore, Japan and even China.

“You could end up with spheres,” said Philip Odonaghoe, an economist at Deutsche Bank AG. “That would be a very smart way to do things. Have an Asian sphere, an Atlantic sphere. Down the track maybe that’s the way this starts to work. Perhaps not opening to the whole world but your own region.”

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