Liam Dann: No travel doesn’t make NZ a ‘hermit economy’


I’ve been dreaming of international travel.

I mean that literally. I’ve been having weird lockdown dreams of adventures in ill-defined foreign cities, composites of memories from New York, Rome, London, Tokyo and Shanghai.

I’d be enjoying them more if they didn’t always seem to involve having lost my kids in the city crowds.

I assume these are stress dreams. But also maybe grief dreams. The kind we have about lost loved ones.

I love international travel but fear it is off the radar for a long time to come.

But however disappointing this is at a personal level, I continued to be amazed at the way New Zealand’s economy has coped with the borders closed.

Globalisation gets a bad rap these days.

But the connections New Zealand has forged and the policies we’ve put in place over the past 35 years are keeping our economy in the game.

The economy remains open for business – considerably more so than it was during my childhood in the 1970s and early 1980s.

There have been some timely reminders in the past few days that New Zealand is no ‘hermit economy’.

These takes – ironically from allegedly right-wing commentators – over estimate the importance of moving people across borders and underestimate the importance of moving capital and doing business.

Capital continues to flow. Commerce is being done at record levels.

At its most fundamental, we see this with our currency.

It is floating and freely traded.

In fact it is one of the top 10 most heavily traded currencies in world.

The beauty of New Zealand’s floating currency is that it is provides a hedge against economic shocks.

When really bad things happen its value falls and that aids our exporters, making their products cheaper in US dollar terms.

This gives the economy an export-led boost just when it needs it.

That hasn’t happened with this latest Covid outbreak.

The dollar is trading well above where it was just before we went into lockdown.

It initially dipped on the news, as traders priced the slower path for New Zealand interest rate rises.

But then the US dollar also dipped as rate-hike expectations faded there.

For international currency traders, New Zealand has remained a good bet.

New Zealand’s terms of trade also hit a record high in the second quarter of this year.

We exported more and at higher prices relative to what we’re paying for imports.

The value of all our exports rose 8.3 per cent while imports prices lifted by 4.8 per cent.

BNZ head of research Stephen Toplis explains it well, in plain English: “A higher terms of trade means the country can buy more imports for any given quantity of exports. It represents an increase in purchasing power and is therefore a strong support of economic activity.”

Inflation worries aside, the good news is that while Covid shipping issues have pushed costs up they don’t appear to have dented the volumes of trade.

On the business front we’ve seen two remarkable international success stories from Kiwi firms during the past few weeks.

Space-rocket company Rocket Lab and video game company RocketWerkz have managed launches that even the most enthusiastic cheerleaders of Kiwi business would have struggled to imagine 30 years ago.

Rocket Lab launched its shares on the Nasdaq – making a billionaire of founder Peter Beck and multi-millionaires of many of his early investors and staff.

Auckland-based video game studio RocketWerkz launched its big-budget, multi-player game Icarus.

The gaming equivalent of a Hollywood blockbuster (complete with Kiwi accents), it has already topped the sales chart on the giant streaming platform Steam.

To be fair, RocketWerkz founder Dean Hall has been vocal about his struggles to get specialised staff into the country in the pandemic.

His issue is the way the film industry seems to be favoured by decision-makers over other high-tech creative sectors.

Rocket Lab has also likely been hampered by border closures and lockdowns.

There’s no doubt getting people across borders is still important for the New Zealand economy and business.

But thanks to technology and this country’s broad-based political support for free-market trade – its matters less than it once did.

Restrictions around people movement have caused specific economic problems.

The biggest is the direct economic loss from the lack of tourists and students.

That’s been devastating for those sectors but has failed to stop the economy growing.

Then there are the worker shortages, hampering that growth.

There are other issues. New Zealand business people do need to get out in the world to sell.

Nobody is arguing closed borders are sustainable long term.

But ultimately the issue that most of us feel most acutely is the loss of our own ability to travel to see family, friend and to holiday.

From an economic point of view this is not a loss- in fact it’s a multibillion-dollar gain, an offset against the foreign exchange being lost through lack of inbound tourists.

Of course, in terms of our ability to connect with family, it can be heartbreaking and, in some cases, tragic.

And as indulgent as international holidays are, I still miss them. I look forward to travelling again some day.

I feel for those in their 20s who may be missing the opportunity for international adventure many of us enjoyed.

I feel for an older generation who may be watching a last window of opportunity for travel close.

The bottom line is Covid sucks. It is just doesn’t suck as much for the economy as anyone expected.

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