Covid 19 Delta outbreak: Auckland lockdown cost $8 billion

Auckland’s Delta lockdown cost the economy $8 billion last year, according to Treasury’s best estimates.

The true cost of the lockdowns will only be known when Stats NZ publishes economic data for the three months to December 2022 on March 17.

However, Treasury’s best estimates were included in a Covid-19 paper produced in November last year – a paper Treasury says still represents the most current estimate of the cost of lockdown.

Treasury estimated the economic impact of Covid restrictions in Auckland between August 17 and November 5 – when Auckland was at levels 4 and 3, and much of the time it spent at alert level 3 step 1 – cost the city $4.5 billion.

That works out at about 5.6 per cent of expected GDP for the whole country over that period.

Auckland’s lockdown, and level 2 restrictions, also hit the rest of the country, costing it 4.2 per cent of expected national GDP over that period.

The paper said that “GDP losses would have occurred even without alert level restrictions, as New Zealanders adjusted their behaviour in response to what likely would have been a more severe Delta outbreak”.

This number represents the economic cost of the lockdown, rather than the cost to the Government of the lockdown, known as the fiscal cost. That number is quite difficult to calculate, but as of early November the Government paid out more than $5b in economic support.

As of the most recent interim Crown accounts, which capture the four months to October 31, revenue to the Government was actually $2.9b higher than expected at the May budget.

However, expenses were also higher than forecast – coming in at $4.9b higher than expected.

Net core Crown debt ended up being $8.5b lower than feared, at $116.1b or 34.2 per cent of GDP.

Act leader David Seymour said the $8 billion figure represented the struggle of many Auckland businesses.

“At one level it’s severe mental health problems where people who may have built up their business over decades suddenly find they are back to zero,” Seymour said.

“That is manifesting itself with some people under so much personal pressure,” he said.

He said New Zealand will face a “hangover” of the cost of Covid in the form of higher interest rates and inflation.

Prime Minister Jacinda Ardern this week reiterated that the Government’s strategy will not be to use lockdowns to confront the Omicron variant.

Seymour gave some backing to this, saying that when thinking about lockdowns one had to consider “what it’s realistically going to do to reduce the spread and reduce the final outcome”.

“Everyone is going to get Covid now. It’s not obvious a lockdown can delay that final outcome,” he said.

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