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Chief economist update: Bubble, bubble getting out of trouble

"Come fly with me, let's fly, let's fly away..."
-Frank Sinatara

It didn't happen overnight, but it's happening ... now. The Trans-Tasman bubble is here! After more than a year - I recall watching Qantas' chief executive saying it's been 400 days - are allowed to fly into New Zealand quarantine-free starting 19 April 2021.

As an aside, our Kiwi brethren have been allowed into our domicile without quarantining since October 2020 - a testament to New Zealand's early win against the coronavirus and Australians' understanding and acceptance that it couldn't be a two-way street ... until now.

The Trans-Tasman bubble marks a fresh and significant step into normalising life after the COVID-19 pandemic.

Both economies stand to gain. Not only would the re-opening of borders sans quarantine re-start postponed reunions and visits t families and friends on both sides of the pond, it would, as the Reserve Bank of New Zealand (RBNZ) declared recently, "support incomes and employment in the tourism sector both in New Zealand and Australia".

True that.

According to Budget Direct: "Tourists from New Zealand spent $2.6 billion in Australia in 2019. The main purpose for travelling to Australia was for holidays. 505,000 tourists came to Australia for holiday purposes."

"The most popular destinations were Sydney with 32%, Melbourne with 27%, and Brisbane with 19% of visitors. New Zealand visitors spent an average of 10 nights in Australia. New Zealand has a population of 4.69 million people meaning that around 29% of the population visited Australia in 2019."

It's a two-way street, with 'tourismnewzealand.com' noting that: "Australian visitors contributed 1.5M (40%) arrivals annually and spent $2.7b in 2019" and "Australian holiday arrivals ... made up 27% of holiday arrivals - but over winter this jumped to 43%".

...and a mutually beneficial neighbourly relationship at that.

Air New Zealand chief executive Greg Foran is happy. He should be. He expects the bubble to lift the airline's capacity to around 50% pre-COVID and thereafter, "...give it some time, we could easily see ourselves running maybe 80% or so, 90%".

For its part, Qantas and Jetstar are looking at 122 return flights per week across the Tasman on 15 routes that would see the Qantas Group flights across the Tasman return to 83% of capacity.

Just think of all the good and gracious things these do for both economies.

More flights to and fro equals greater demand for staff, not only for the airlines industry but for tourism and ancillary products and services for both Australia and New Zealand.

All fine and dandy, Andy but flyers and skiers beware. This is because given the uncertain nature of the coronavirus, conditions could change at a moment's notice - i.e. lockdowns re-imposed.

New Zealand Prime Minister Jacinda Ardern said it best: "People will need to plan for the possibility of travel being disrupted if there is an outbreak ... We may have scenarios where travel will shut down one way. It may therefore leave travellers - for a period of time - stranded on either side of the Tasman."

The Trans-Tasman bubble would put more planes in the air (boats on the sea, if your prefer sailing) and more jobs in the ground.

The added employment and personal and business earnings these bring to both Australia and New Zealand would lift economic activity in both countries.

Read our full COVID-19 news coverage and analysis here.