Q3 2021

APAC / Issue Q3 2021 5 NEWS , Under pressure from businesses and public sectors facing a worker shortage that policymakers fear will fuel inflation, New Zealand Prime Minister Jacinda Ardern is due to unveil plans this week to reopen the country’s borders. Ardern garnered global praise for containing local transmission of COVID-19 via an elimination strategy, imposing tough lock - downs and slamming New Zea- land’s international border shut in March 2020. However, that tactic is now strain - ing an economy heavily reliant on an immigrant workforce, leading to higher costs and lower output. The dairy, horticulture, housing, services, health and broader pub- lic sector have all reported acute staff shortages, and called on the government to raise border blocks. The pressures were visible on Monday when around 1,500 hospi - tal midwives walked off the job, cit - ing overwork due to “critical short - ages”. More than 30,000 nurses are due to strike later this month for the second time since June, seek - ing better pay and working condi - tions amid the staff shortages. “We rely on internationally qual - ified nurses to meet our staffing needs but with the borders closed we are not getting any,” said New Zealand Nurses Organisation in - dustrial services manager Glen - da Alexander. “Kiwis are not coming into nursing as they are put off by the work - load and the low pay,” she added. “Nurses are burning out, they are getting sick themselves and are constantly worried that they will make mistakes that could affect their patients.” Virus-free New Zealand plans border reopening amid labour shortage By PraveenMenon, Reuters News The hospitality sector has been similarly stretched. About 2,000 eateries stopped service and turned off lights last month as part of a two-month campaign to draw the government’s attention to the severe shortages chefs and other skilled labour. Ardern has indicated she will remain cautious when she on Thursday outlines her govern- ment’s six-month plan for public health and border control. “Any changes to border settings will be carefully considered in phases, based on risks,” she said on Mon - day. “We have come too far and gained too many freedoms to rush at this next step and go backwards.” Ardern last week opened one- way quarantine-free travel for seasonal workers from Samoa, Tonga and Vanuatu, all countries with no active COVID cases, to address labour shortages in the horticulture industry. New Zealand has recorded about 2,500 COVID-19 cases, including 26 deaths, among the lowest in the world and a track record that helped Ardern retain power in a blowout relection last October. The last reported case of local transmission was in February. The roadmap will be based on the findings of a report by experts including epidemiologists titled “Reconnecting New Zealanders to the World.” Still, businesses are pressing for the plan to include the resumption of labour imports, sooner rather than later. The country’s unemployment rate is at pre-COVID levels, with more jobs than skilled workers. The underutili - zation rate, a measure of how many people are working less than they would like, is at a record low. The labour shortages are push- ing up costs as employers pay more to keep staff. Annual infla - tion reached a record 3.3% in the second quarter, much higher than central bank predictions. CHANGING TRACK Economists think the pressures will force the Reserve Bank of New Zealand (RBNZ) to tight - en monetary policy next week to avoid overheating of the economy. “Monetary and fiscal policy quite possibly overachieved in creating demand,” said ANZ Chief Econo - mist Sharon Zollner. The government pumped stimulus through wage subsidies while the RBNZ dished out a NZ$100 billion quantitative easing programme in pandemic-induced polices that has caused rising inequality and worsened a housing crisis. Amajor concern for Ardern and pol - icymakers is the Delta coronavirus variant, which is raging in neigh- bouring Australia and the world. Delta-fuelled outbreaks across Australia led Ardern to last month suspend the so-called “travel bub- ble” that allowed quarantine-free travel between the two countries. Experts have warned that the ar - rival of Delta into New Zealand would result longer lockdowns, particularly given only 21% of the country has been fully vaccinated. “It (Delta) is much more dangerous than other strains of COVID,” Ardern said. “It changes our risk calculation in the same way that it’s changed everyone’s risk calculation.” and was worried about high household debt levels. “We need to scale up debt restructuring,” he said. “There are a lot of debtors out there that they’re not going to have adequate cash flow to service debts for quite a while.” NO BAHT LEVEL IN MIND Some business groups have said the economy could shrink this year due to the coronavirus. The BOT, which has flagged the fact that only about 7% of its 66 million population have been fully vaccinated as another growth risk and now expects just 150,000 foreign tourists to visit this year, last week cut its 2021 growth forecast to 0.7%. Sethaput said a contraction this year in Southeast Asia’s second-largest economy - which shrank 6.1% last year as tourism collapsed- was “not that likely”, and that the bank also remained comfortable with its forecast that exports will grow 17%. Second quarter GDP data is due on Aug. 16. There were 6.7 million foreign tourists in 2020, down from nearly 40 million in 2019. Thailand is preparing to reopen more broadly to foreign visitors later this year, though Sethaput said a still weak tourism sector meant the economy was not expected to reach pre-pandemic levels until the first quarter of 2023, lagging neighbouring countries. Sethaput said the weakening baht reflected weaker economic fundamentals but external vulnerabilities were low. “We have no ...predetermined level of the baht in mind,” he said. “We’d prefer that movements in the exchange rates be driven by economic fundamentals, rather than short-term, speculative type pressures... and be not excessively volatile”. Foreign exchange rates had not helped exports much in volume terms, but with margins, he said. The baht has depreciated by 10% against the dollar this year, making it Asia’s worst performing currency.