Cyclone Gabrielle puts businesses under pressure

Leaders examine sector impacts

Cyclone Gabrielle puts businesses under pressure

Cyclone Gabrielle has left New Zealand in a state of disrepair, as heavy rain and gale-force winds cause slips and flooding, leaving thousands of homes and businesses without power.

Leaders from the retail and hospitality industries say many businesses have been left grappling with physical damage and reduced cashflow, on top of existing challenges such as a tight labour market and a rise in the minimum wage.

As reports of damage and impacts are ongoing, the economic impact is difficult to quantify, however economists expect a boost in spending during the recovery process.

To assist in the cycle response across the country, the Government declared a national state of emergency early on Tuesday morning, applying to Northland, Auckland, Tairāwhiti (Gisborne), Bay of Plenty, Waikato and Hawke’s Bay regions.

Addressing media representatives at 11.30am Tuesday, Prime Minister Chris Hipkins acknowledged that Cyclone Gabrielle arrived “hot on the heels” of other extreme weather events (such as the Auckland Anniversary floods).

“It is a pretty high threshold for a national emergency to be declared, so the fact that we have done that shows just how big the situation is that we’re dealing with,” Hipkins said.

In response to questions about financial support, Hipkins said the government knew that due to the global situation, many New Zealanders were suffering financial stress.

It would take a few days to get a handle on how (and how many) families were affected by extreme weather events over the last few days, he said.

“That will include working with the insurance companies to get a good handle on how much of the damage will be covered by insurance and how much won’t be,” Hipkins said.

“It will include working with all of the relevant community agencies to make sure that we’re supporting those most vulnerable whānau who won’t have some of those other supports that many of us would rely on in these sorts of circumstances.”

Retailers operating under reduced hours

Retail NZ CEO Greg Harford (pictured above left) told NZ Adviser that retailers in certain areas were grappling with flooding, while others were doing their best to provide ongoing services to customers.

Some stores are closing early, and others are unable to open, mainly due to power or staffing issues, Harford said.

While some retail premises had reported damage, Harford said the biggest issues facing the retail sector were a reduction in sales (resulting in reduced cashflow), and difficulties of operating in the current environment.

“Areas outside the Upper North Island are also being substantially impacted by the fact that Aucklanders have been staying home and unable to travel,” Harford said.

Speaking about challenges experienced within the retail sector, Harford acknowledged that many business owners had incurred “substantial debt” through the COVID-19 pandemic. He said businesses were now grappling with the cost impacts of recent flooding and the cyclone, a tight labour market, increased sick leave entitlements and the latest Government-imposed hike in the minimum wage ($22.70 per hour from April 1).

“There are increasingly serious questions about the long-term viability of smaller retail businesses, particularly given that many business owners don’t earn minimum wage themselves out of their businesses,” Harford said.

While many Kiwis have supported businesses by shopping local, Harford said there was a need for the government to get behind business, creating a better environment for businesses to operate in, and support for affected stores.

Hospitality sector challenged by drop in tourism, cancellations

Restaurant Association of New Zealand CEO Marisa Bidois (pictured above centre) said the impacts of Cyclone Gabrielle on hospitality businesses were “significant” and were not limited to physical damage.

Weather conditions over the previous two weeks have impacted tourism, and footfall is significantly lower than a typical February month, Bidois said. Valentine’s Day (February 14) represents an important trading day for hospitality, and Bidois confirmed that the sector had seen large-scale cancellations due to the cyclone.

Additionally, Bidois said the hospitality sector had experienced supply chain issues, such as  disruptions to deliveries and shortages on some fresh produce, and some had lost power, impacting chilled stock.

The main concern for hospitality businesses was still around rebuilding, she said.

“It has been a challenging few years for our businesses and many were relying on a strong summer of trading to assist with the recovery,” Bidois said. “So it is a big blow for many who were experiencing some great positive trading before the weather events started.”

Cyclone impacts on economy and housing

Questioned about the economic cost of Cyclone Gabrielle, independent economist Cameron Bagrie (pictured above right) told NZ Adviser the key considerations were short-term disruption, reconstruction and rebuilding, and challenges around infrastructure.

While the disruptions would pass, Bagrie expected that for many businesses, the latest round of weather events may be the last straw. Insurance funds used in the reconstruction and rebuild process would likely boost growth and add to inflationary pressures, he said.

“The third [consideration] is the wake-up call over the state of infrastructure with a huge number of people, buildings, roads, railway lines, piping system and the energy sector exposed to flood/weather related risk,” Bagrie said.

Bagrie referred to a 2019 report from the National Institute of Water and Atmospheric research (NIWA) on flood risk under climate change, which estimated 675,000 people, 411,000 buildings and just under 20% of the roading network were exposed to river flooding in the event of extreme weather.

“A few chickens are coming home to roost,” Bagrie said.

In a report released on Monday, Kiwibank economists noted that the impact of Cyclone Gabrielle on businesses represented ongoing lost income, and that many had suffered extensive damage, with the likelihood of more.  There would be a “surge in economic activity” as large parts of the country clean up and repair, Kiwibank economists said.

Banks, insurers offer support

Coinciding with a national state of emergency declared on Tuesday, ANZ has confirmed it is offering financial support to affected customers. 

ANZ managing director of business Lorraine Mapu said targeted assistance is available for business customers, including temporary overdraft facilities and the ability to defer loan repayments. 

Mapu also encouraged ANZ personal and home loan customers to talk to the bank if they need to relieve pressure on their financial situation, with restructuring home loan repayments or access to additional credit among the ways ANZ could help.

IAG (which owns AMI, State and NZI) said on Tuesday it had received over 21,000 claims for the recent North Island floods, confirming it had paid out over $23m in claims over the last two weeks.

AMI, State and NZI CEO Amanda Whiting said the recent flooding, followed by the arrival of Cyclone Gabrielle, had been heart-breaking and “hugely disruptive” for those affected.

“We are working our way through the flooding claims as quickly as possible, while also processing claims from those affected by Cyclone Gabrielle,” Whiting said.

“As always, our number one focus is supporting our customers and communities through this really tough time.”