Swine Flu Another Economic Threat

Just as the share market looked like it was making a recovery, a totally unexpected set back may have occurred.  Several years ago, SARS, (or Bird Flu) made an appearance.  Now it is the turn of Swine Flu. 

Pandemics are a normal occurrence, just like recessions.  Both seem to occur around four times each century and can be without warning.  When SARS reared its ugly head, there was a major impact, particularly on Asian economies.  It was also particularly negative on the travel industry as a whole.

Swine Flu seems to be spreading particularly quickly.  This is not surprising.  With an apparent epicentre in Mexico it is well placed to spread rampantly.  The border crossings with the United States particularly in the San Diego area are the busiest in the world.  Hundreds of thousands cross the borders each week.  Mexicans head north to work in the USA, and Americans head south to stock up on cheap leather, alcohol, jewellery etc.  Food hygiene is not one of the good points about experiencing Mexico, so it is completely understandable that a lot of people are ill after they have visited the country.  The symptoms can be similar to those of the flu.

Over the past few days there has been a lot of news about Swine Flu.  It will have some influence on our economy.  Some industries will be more susceptible than others.  Tourism associated companies could be particularly badly hit.  Fewer people may travel, both inbound and outbound.  If inbound travel decreases significantly there will be major consequences on our travel industry.  It is a major earner of overseas funds.  The hospitality industry is also a very significant employer.

The gateway for visitors to New Zealand at this time of year now that the inbound cruising season has come to an end is primarily Auckland International Airport.  Lower passenger numbers will impact on the airport, and its associated retailers and suppliers.  However, only having one airport for long haul flights from America makes passenger screening a lot easier than for those countries with essentially open borders such as the member countries of the European Community. 

In a primarily agriculturally based economy, our disease control mechanisms have been developed to control the spread and containment of agricultural pests and diseases.  These invariably have the potential to spread rapidly.  Fortunately, from an epidemiological viewpoint, our authorities may have more control experience and expertise than those in many other countries.

Containment of Swine Flu may not prove to be a significant issue health wise.  There is however a very high risks that it will have a negative effect on our economy largely through sentiment and over reaction.  Unfortunately this is just at a time when the last thing we need as a country is an additional strain on our economy.  Ironically, it may mean that more New Zealanders will be inclined to holiday at home which is good for our economy and will make up for some of the loss of overseas visitors.  Hopefully over the next few weeks, health authorities world wide will have better control over Swine Flu than the financial markets have on the global economic woes.