Coronavirus (COVID-19) clickbait

In our evolving interconnected world, coronavirus has become the perfect tabloid media clickbait. It plays straight into our anxieties and fears. We are lemmings with an inherent magnetism towards mass hysteria.

So far, there are only five confirmed cases in New Zealand and every case is still headline news. The hysteria is news itself and there is already a rush on supermarkets, most notably on toilet paper and paracetamol. The rush on water is odd given we have plenty of free chlorinated water.

The numbers of coronavirus will undoubtedly increase, and significantly. But as has already been pointed out in the media, roughly 1.5 billion people get the flu each year.

Coronavirus has officially infected over 100,000 people. However, the infection rate will be grossly underreported and will be ten times that number. Many younger people don’t show symptoms and will go unreported.

Although the death rate (currently around 3%) is high, it will drop when the reporting on the infection rate improves.

To keep coronavirus in perspective, 500,000 people die from the flu every year. It is mostly the elderly or those with other illnesses. It’s not news and we don’t panic every flu season.

Around the globe another 400,000 people are murdered, and closer to home, a person literally dies on New Zealand roads every day while 30 are injured.

Given the level of road fatalities I’m surprised we haven’t been hoarding toilet paper for years.

Behavioural Economics

What the current pandemic does highlight is how economies are driven by confidence and fundamentally by human behaviour. It is our change in behaviour that risks bringing down the economy.

Early on, the impact was on forestry and specifically logging. The Chinese simply don’t need logs right now and New Zealand forestry owners have had to stop harvesting and retrench their crews.

The impact moved into tourism with a dramatic slow-down from the Chinese market. More recently, the contagion has spread across the whole tourism market as it becomes more obvious that nobody wants to jump on long haul flights. Tourism is in serious trouble and there is no quick fix. Long haul trips are planned a year in advance. New Zealand is not a spur-of-the-moment destination.

We’ve now started to hear about retailers who can’t pay their rent because they don’t have any customers, especially those that relied on international students and the Chinese market.

When businesses can’t pay rent, it spills into the wider economy. Retailers were already finding it hard with no ability to move margins plus higher costs from rent and higher minimum wages. Add a sprinkle of COVID-19 to dropping sales and there could be a number of retail business struggling to survive. It might not simply be less consumer spending, with retailers struggling to restock.

The spillover could hit the commercial property market – particularly retail and tourism related properties like hotels. Although hotel brands are part of big multi-national corporates, the reality is that they are essentially franchises run by local operators. With an undersupply of hotels and rapidly growing tourism, these operators have signed up to expensive leases. These businesses are highly leveraged, and some won’t have the balance sheet to cope with lower room rates and lower occupancy. Watch this space. 

The other side of the economic crisis will be our medical system. It struggles to cope with the normal flu season, let alone what is coming this winter. The worst of it will be around August-September so we have time to prepare.

The share market is now in correction phase having dropped by over 10 percent. It could easily keep falling as the wider economic consequences become obvious.

We could easily have a short-sharp recession.

The good news

These viruses highlight the risks of living in densely populated cities, and the importance of food security and modern farming practices. China is going to have to seriously reconsider its food safety practices with multiple incidents of viruses jumping species – bird flu, SARS, MERS, and now COVID19.

Historically Australia has been the lucky country with its rich endowment of natural resources. I wonder if that is changing with unbearable summer temperatures over 40 degrees and wild fires.

I couldn’t think of a better country to live in than New Zealand. Surrounded by water, miles from every hot spot in the world, still a reasonably temperate climate, natural beauty, clean air, water, and self-sustainability.

Most reports I read forecast New Zealand to have a major economic boom towards the back-end of the 2020’s as Asian economic growth peaks. If I consider growing Asian wealth, New Zealand Inc as a brand, and how Asian economies respond to risk, these could all potentially amplify our opportunity.

Let’s hope our Government gets smarter around the country we want to be over the next fifty years.

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