Australia, New Zealand Recovery Paths to Differ on Virus: HSBC

(Bloomberg) --

Australia’s suppression of the coronavirus in contrast with New Zealand’s elimination will bring different outcomes in their growth paths, according to Paul Bloxham at HSBC Holdings Plc., as cases spike Down Under while Kiwis are heading to the rugby.

Australia’s southern state of Victoria has seen an isolated sharp rise in new cases in recent days. New Zealand, on the other hand, has recorded no community transmission for 38 days -- the 20 active cases are recent overseas arrivals and are in quarantine.

Given these outcomes, HSBC said in a Monday report it expects a “U-shaped” recovery in Australia, with a sharp fall in second-quarter GDP of 7.5% followed by a modest rise of 0.4% in the next three months. It sees a much sharper slump of 14.7% in New Zealand for this quarter, but expects the economy to be on track for a “V-shaped” rebound with a 12.6% surge during July-September.

Cluster outbreaks are possible in Australia with the virus still present, as Victoria shows, and this is likely to restrain the pace of reopening, Bloxham said. New Zealand, which initially had a more severe lockdown policy that eliminated Covid-19, now sees its economy well placed for a powerful rebound.

“The confidence instilled by the local elimination of the virus is prompting a rapid return to local life as normal,” Bloxham, chief economist for Australia and New Zealand at HSBC, said in a research note.

While Victoria’s outbreak is unlikely to herald a broader resurgence in Australia as most state borders are closed and there are few active cases elsewhere, there are signs of greater household caution in New South Wales and renewed panic supermarket buying.

Victorian authorities have extended a state of emergency, re-instituted some social distancing measures, slowed reopening plans and launched a testing blitz, with 100,000 planned over a 10-day period.

“Sold out toilet paper in some parts of Australia; sold out rugby matches in New Zealand,” said Bloxham. “The signals from these differing phenomena support our contrasting ‘U-shaped’ versus ‘V-shaped’ recovery profiles for the antipodeans.”

©2020 Bloomberg L.P.