Return of coronavirus after 102 days threatens New Zealand’s recovery

New Zealand is reeling from its first coronavirus outbreak in more than three months, throwing the largest city Auckland back into lockdown and threatening to dent the economic recovery.

The country’s run of 102 days without community transmission of the virus ended late Monday with the announcement that four new cases had been detected in an Auckland household.

Prime Minister Jacinda Ardern put the city of 1.6 million people into lockdown Wednesday for an initial period of three days as authorities try to trace the origin of the infections. Social distancing rules and limits on gatherings have also been reimposed on the rest of the country.

New Zealand had been the envy of the world after it eliminated local transmission of Covid-19 with a strict nationwide lockdown in April and May, and its economy bounced back strongly once restrictions were lifted. Now that recovery may be at risk as businesses close in Auckland and chances dwindle of the nation re-opening its border to foreigners any time soon.

“From an economic perspective, the news is a blow,” said Nick Smyth, a strategist at Bank of New Zealand in Wellington. “The economy had rebounded much quicker than expected. The news overnight reinforces the still-fragile nature of the recovery.”

The nation’s central bank is due to deliver a monetary policy decision later Wednesday. New Zealand’s benchmark stock index fell 2.4% at the open in Wellington, while the New Zealand dollar fell to a three-week low of 65.76 U.S. cents.

From noon today, Auckland will move to level 3 on New Zealand’s Covid alert system, signaling people should stay at home if possible and avoid contact with others. Schools will close for most pupils while bars, restaurants and customer-fronting businesses will shut. Travel into and out of the city will be restricted.

The rest of the country will go to level 2 restrictions that include social distancing and limiting the size of gatherings to 100.

Scientists have warned that more cases are likely to be found, raising the likelihood that restrictions will have to remain in place for longer than three days.

September Election

The outbreak comes just weeks before the Sept. 19 election, with Ardern’s Labour Party riding high in the polls due largely to her successful management of the pandemic.

The main political parties today suspended their election campaigns, and the leader of the main opposition National Party, Judith Collins, said the September vote is now in doubt.

Unless the outbreak can be resolved quickly, the government will have to look at delaying the election, Collins told Radio New Zealand. National’s campaign launch now probably won’t proceed as planned on Aug. 16 in Auckland, she said.

Ardern on Monday refused to be drawn on whether the election would proceed, saying only that officials have plans to run the vote under alert level 2.

“At this point my absolute focus is our immediate response to these cases,” she said. “I’ve not given any consideration to any impact on the election at this stage. I don’t want to speculate at this point.”