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Covid Scenario Modelling Tools - User Guide PDF
Covid Scenario Modelling Tools - User Guide PDF
© 2020. For information, contact Deloitte Scenario Modelling Tools User Guidance v1.0 | September 2020 2
Executive Summary
© 2020. For information, contact Deloitte. Scenario Modelling Tools User Guidance v1.0 | September 2020 3
Covid-19 Scenario Modelling Tools
DIA are supporting Local Government to plan post-Covid recovery
DIA is working with Deloitte to develop a set of scenario DIA and Deloitte are hosting a number of virtual
modelling tools to assist local authorities with LTP workshops to preview the Scenario Modelling Tools
scenario modelling of the potential financial impact of and invite you to nominate attendees from your
different Covid economic scenarios and different policy Council. This would be most interest to Council
responses. The tools are designed to assist Councils to Officers that are involved in:
ask ‘what if’ questions such as: • Developing Council strategic Covid response,
• What could be the financial impact on Council cash • LTP/AP planning,
Covid-19 Scenario Modelling
flow, income, debt levels and debt headroom under Tools comprise: • Finance/Treasury/LGFA funding,
different post-Covid economic scenarios?
• Deloitte Access Economics • Data insights and analytics.
• How might Council policy responses such as rate Regional Economic Scenarios
The project team may also present the Scenario
deferrals, rating remissions, changes in variable (High and Low cases)
• Interactive Data Visualization Modelling Tools at local government forums.
fees/charges, changes in income from CCOs, revised
Dashboard Requested Action:
capex or opex profiles or targeted grants affect debt • LTP Scenario Model (a
headroom or changes in rates? separate Excel template) Please forward this pack to the relevant Council
Officers who would find this tool useful and contact
Click on the following link to preview the regional Lauren Thompson to reserve a workshop place.
Deloitte Economic Scenarios and data visualisation
dashboard, which are key artefacts that comprise the
Scenario Modelling Tools package. Lauren Thompson
LGModellingTool@dia.govt.nz
Or copy the following link: 022 167 4770
https://public.tableau.com/profile/deloitte.nz#!/vizhom
e/Covid-19scenariomodellingtools/Cover
© 2020. For information, contact Deloitte Scenario Modelling Tools User Guidance v1.0 | September 2020 4
Covid-19 Scenario Modelling Tools
Core Functionality
The scenario modelling tools are designed to work ‘out of the box’ and will come pre-populated with Councils’
most recent LTP or AP submissions, with the functionality to:
• Access national and regional data sets provided from MBIE, MSD, Statistics NZ and the Ministry of Health of
key economic, health and economic activity indicators that are relevant to scenario planning via an
interactive dashboard
• Access to up to date (Sept 2020) National and up to 17 regional post-Covid economic impact and recovery
scenarios developed by Deloitte Access Economics, covering: regional GDP, sector impact, population and
unemployment metrics
• Provide a mechanism to record the evidential base and change control/approval processes for “significant
forecasting assumptions” that inform the LTP process
• Scenario analysis functionality to analyse a range of economic shock scenarios and possible policy response
scenarios
• High level analysis of the potential impact on debt headroom against LGFA covenants
• Sharing of best practice, lessons learnt, and approaches across councils with similar characteristics.
• Allow optional customisation of the scenario modelling tools with more granular analysis of line items or
more in depth regional economic analysis
Access to the Scenario Modelling Excel Tools, populated with Council specific LTP data, and supporting user
guidance will be made available to Councils after your attendance at one of the workshops.
© 2020. For information, contact Deloitte Scenario Modelling Tools User Guidance v1.0 | September 2020 5
Overview of the Scenario Modelling Tools
The Scenario Modelling tools comprise of three key components:
A set of High and Low economic impact A web based interactive dashboard of national A high level Excel based scenario modelling tool
scenarios for 17 regions that provide forecast and regional economic, health and economic that is pre-populated with Councils’ 2018 LTP and
regional scenarios of GDP, population change activity indicators that can be used in 2021 AP data that supports a range of Covid
and unemployment. Also provides an analysis conjunction with Councils own local data sets economic impact scenarios and policy response
of current regional GDP by sector impact. to inform economic shock scenarios and policy scenarios. Designed to allow optional Council
response specific customisation
© 2020. For information, contact Deloitte Scenario Modelling Tools User Guidance v1.0 | September 2020 6
Benefits of the Tools
The Scenario Modelling tools are designed with the following objectives
Scenario Analysis
• Pre-populated with Councils’ existing LTP/AP data to be used ‘out of the box’ with a basic level of scenario modelling functionality,
based on practices developed by larger metro Councils which may be of particular interest to smaller councils
• Ability to assess the size of the funding gap and indicative LGFA debt headroom under different economic shock scenarios or policy
response scenarios
• Access to a range of national and regional economic, health and economic activity indicators including high frequency indicators via an
interactive dashboard
• Access to a set of High and Low economic forecast scenarios showing the potential ‘book end’ range of impacts of COVID-19 on regional GDP,
employment, and demographics
© 2020. For information, contact Deloitte Scenario Modelling Tools User Guidance v1.0 | September 2020 7
Where to get further support
© 2020. For information, contact Deloitte Scenario Modelling Tools User Guidance v1.0 | September 2020 8
Interactive Data Visualization Dashboard
© 2020. For information, contact Deloitte. Scenario Modelling Tools User Guidance v1.0 | September 2020 9
Interactive Data Visualisation Dashboard
A web based dashboard of national and regional economic, health and economic activity indicators that can be used in conjunction with Councils’
own local data sets to inform economic shock scenarios and policy response
The tool displays the Regional and National Economic forecast scenarios developed by Deloitte Access Economics (current to September 2020).
These include a set of High and Low economic impact scenarios for 17 regions and provide a scenario forecast of GDP, population change and
unemployment. It also provides an analysis of current regional GDP and employment by sector.
© 2020. For information, contact Deloitte Scenario Modelling Tools User Guidance v1.0 | September 2020 10
Interactive Data Visualisation Dashboard
Regional economic forecasts
© 2020. For information, contact Deloitte Scenario Modelling Tools User Guidance v1.0 | September 2020 11
Interactive Data Visualisation Dashboard
Retail activity indicators
© 2020. For information, contact Deloitte Scenario Modelling Tools User Guidance v1.0 | September 2020 12
Scenario Modelling Tool
© 2020. For information, contact Deloitte. Scenario Modelling Tools User Guidance v1.0 | September 2020 13
Scenario Modelling Tool
Assessing potential COVID-19 impacts on long term plans and planning a policy response
The model utilises two sets of scenarios.
1. The first is the Economic Impact Scenarios, which assesses the potential impacts of COVID-19 on Council finances and the size of any potential funding gap.
2. The second is a Policy Response Scenarios, which assesses how different policy levers may mitigate the funding gap or increase the funding gap through
additional stimulus measures.
1 2
Economic impact Scenario
• What are the potential policy responses and how
• What are the potential impacts of
will these affect the size of the funding gap?
COVID on revenue items?
• What might be the effect on Council debt
• Could this result in a funding gap?
headroom (measured against LGFA covenants)
© 2020. For information, contact Deloitte Scenario Modelling Tools User Guidance v1.0 | September 2020 14
Steps to populate and use the Scenario Modelling Tool
Overview: Assess the impact of COVID-19 on the LTP and test policy responses
Step 1: Populate the Step 2: Create Pre-Covid Baseline Step 3: Set the Economic Step 4: Set the Policy
Model with Data Shock Scenario Response Scenario
Iterate scenarios
© 2020. For information, contact Deloitte Scenario Modelling Tools User Guidance v1.0 | September 2020 15
Step 1: Populate the database
Step 1: Populate Step 1 is to populate Dataset. The 2018 LTP is the starting position, but can be updated with a draft 2021 LTP if available.
Dataset Step 1A: Populate Model with 2018 LTP data in the 2018 LTP Inputs tab. This is already done by the model.
• FY2021 Annual Plan and Step 1B (Optional): Populate Model with 2021 AP Data in the 2021 AP Inputs tab. This is already done by the model.
2018-2028 LTP is already in
the model. Step 1C (Optional): Enter Normalisation Adjustments to the FIS-21AP sheet to generate forecasts for 2022 and 2023. This is
only required if you intend to use the 2021 AP data in the calculations.
• Draft 2021 LTP can also be
input if available. Step 1D (Optional): The model has space to enter high level LTP information for the financial statements and funding impact
statement. Enter your draft 2021 LTP data in the following tabs:
a. Balance Sheet (BS-21LTP)
b. Profit and Loss (LP-21LTP)
c. Financial management (FM-21LTP), and
d. Funding impact statement (all of council) (FIS-21LTP)
The level of detail will be at a higher level than what Councils usually report on. There is opportunity to include additional line
items in Step 2 if required.
Step 1E: Check other inputs on the Control sheet for interest rates and debt balances are appropriate.
© 2020. For information, contact Deloitte Scenario Modelling Tools User Guidance v1.0 | September 2020 16
Step 2: Create a pre-COVID19 baseline
© 2020. For information, contact Deloitte Scenario Modelling Tools User Guidance v1.0 | September 2020 17
Step 3: Set the Economic Shock Scenario
Note: Refer to the National and Regional Data Visualisation Dashboards for relevant data sets to inform the
scenario profiles (see over page)
Step 3: Define
Economic Shock
Step 3A: In the Dashboard tab:
Scenarios
• Option to create up to • define the Economic Shock Scenario names
five scenarios
• To add a scenario,
populate the scenarios
with the expected
change (100% = 100%
of baseline)
• Select “active scenario”
is the scenario which
you select to analyse.
Step 3B: In the Economic Shock Input tab:
• Scroll to Column T. There is spare columns to enter five Economic Shock Scenarios.
• Set the Economic shock variables for each Economic Shock Scenario by changing scenario profiles for each Scenario (as a
% of the Baseline). 100% = no change from Baseline. The example below shows Fees and Charges as 70% or 85% of
baseline.
© 2020. For information, contact Deloitte Scenario Modelling Tools User Guidance v1.0 | September 2020 18
Step 3: Set the Economic Shock Scenarios
Making use of data provided in the data visualisation tool
The Data Visualisation Tool includes information at a national, regional, and local council level on activity levels as well as forward looking forecasts of GDP,
employment, and demographics. In conjunction with data sets held by Councils, the information in the tool can be used to inform and provide the evidence base to
significant forecasting assumptions in the LTPs.
Access the tool by copying the following link: https://public.tableau.com/profile/deloitte.nz#!/vizhome/Covid-19scenariomodellingtools/Cover
Example: How will Porirua’s demand driven revenue items be affected in FY2021? Demand driven items could include fees and charges (such as swimming pools and
libraries, and spots clubs), building consents, and revenue from grants and subsidies.
Change in the level of activity due to COVID Forecasts of GDP and employment
E.g. electronic card data.
Wellington Region is expected to have fared relatively well through COVID-19
Consumer expenditure in Porirua City performed slightly better over the compared to the average New Zealand region. This is largely due to a
comparatively lower proportion of employment in sectors that were heavily
lockdown periods compared to the national average.
impacted by COVID-19.
Expenditure declined by 43%pa during L4 lockdown in Porirua city, The graph below shows regional employment by sector grouped by COVID-19
compared to the same week a year earlier. This was in line with the impact. For example, 14% of the workforce is employed in Public
national average. However, the city regained momentum quickly as the administration, which was one of the least hit sectors.
country emerged from Level 3 and 4 lockdown, possibly reflecting a
higher proportion of people choosing to work from home and buy local.
© 2020. For information, contact Deloitte Scenario Modelling Tools User Guidance v1.0 | September 2020 19
Step 4: Set the Policy Shock Scenario
Policy examples:
• “Can we afford to increase
rates by 3% instead of 5%
next year?”
Step 4C: In Dashboard, Select the Active Policy Response Scenario
• “Is there sufficient debt
headroom to increase Assess the 'Size of the Funding Gap' and 'Impact on LGFA Debt' under the Active Policy Response Scenario
capex?” Step 4D: Iterate Steps 3 and 4 to refine the LTP Scenarios. Record the Supporting Assumptions under each Scenario
© 2020. For information, contact Deloitte Scenario Modelling Tools User Guidance v1.0 | September 2020 20
Data sources
A breakdown of the data used for the Scenario tool
© 2020. For information, contact Deloitte Scenario Modelling Tools User Guidance v1.0 | September 2020 21
Model Assumptions
List of modelling assumptions
Users should note the following key assumptions. • Fees & Charges scaling factor: The user inputs a positive or negative %
which is added or subtracted from total fees and charges.
Baseline:
• Capex deferral: The user inputs a negative dollar amount of capex
• The model uses a baseline forecast which by default is the 2018 LTP. deferred and a positive dollar amount of capex incurred.
Alternatively, users can select to use the 2021 AP or load a draft 2021 LTP
to use as the baseline. • Opex deferral: The user inputs a negative dollar amount of opex
deferred and a positive dollar amount of opex incurred.
• The model allows users to manually break down the baseline line items
to a more granular view. Any balancing item between the manually • Opex on COVID related initiatives or policy responses: The user inputs
entered line items and the total is captured within an ‘other’ category. a positive dollar amount of additional opex.
Economic shocks • Sources of funding: The user inputs a positive dollar amount of
additional sources of funding.
• A single shock factor can be applied to each line item in each year.
Economic shock factors are inputs to the model. The model does not • Note that all policy responses are applied independently. For example,
calculate economic shock factors, however an example on how these both the rates scaling factor and rates remission percentage apply to
shock factors can be developed is included in the model. pre-policy response total rates.
Policy responses Debt and Covenants
• The model includes the following policy response tools: • The model calculates a funding balance after economic shock factors and
policy responses are applied. Any funding deficit or surplus accumulates
• Rates scaling factor: The user inputs a positive or negative % which is in a modelled debt facility as debt or cash. Interest is applied based on an
added or subtracted from total rates. input interest rate.
• Rates deferral: The user inputs a negative dollar amount of rates • Any existing debt facilities or cash in the baseline remain unchanged.
deferred and a positive dollar amount of rates collected. Note that if different sources are used to construct a baseline, the
• Rates remission: The user inputs a positive percentage which is forecast debt balances from year to year may not reconcile. In this
subtracted from total rates. situation the LFGA covenant calculations may not be accurate.
© 2020. For information, contact Deloitte Scenario Modelling Tools User Guidance v1.0 | September 2020 22
Model Assumptions
LGFA covenants
The model calculates three LGFA covenants following a worked example Net interest as a percentage of total revenue.
provided by LGFA. The model is based on the Funding Impact Statement • Net interest is calculated as finance costs (2002) plus any net interest
with a lower level of granularity than what would normally be used to calculated on the model debt facility resulting from the deficit or
calculate covenants. Line items used to calculate LGFA covenants are surplus created as a result of economic shocks or policy responses.
estimated on the following basis.
• Total revenue is calculated in the same manner as net debt as a
Net debt as a percentage of total revenue. percentage of total revenue.
• Net debt is calculated as Net interest as a percentage of annual rates income
− 9006_Borrowing (total debt) • Net interest is calculated in the manner described above.
− Less 9004_Cash & financial investments/monetary assets • Annual rates income is calculated as the sum of:
− Plus / less any accumulated funding deficit or surplus created as a − 1001_General rates, UAGC, rates penalties
result of economic shocks or policy responses is also included
within net debt. − 1002_Targeted rates (excluding metered water)
• Total revenue is calculated using the FIS, as the sum of: − 1002b_Targeted metered water rates
• Annual rates income:
− 1001_General rates, UAGC, rates penalties If Councils add more granularity when constructing their baseline,
adjustments are likely to be required to the LGFA covenant calculations.
− 1002_Targeted rates (excluding metered water) Please refer to the LGFA for detailed guidance.
− 1002b_Targeted metered water rates
• Subsidies & grants income:
− 1003_Subsidies & grants for operating purposes
− 3001_Subsidies & grants for capital expenditure
• Other income:
− 1004_Fees & charges
− 1005b_Interest & dividends from investments
− 1006_Petrol tax, fines, infringement fees & other
© 2020. For information, contact Deloitte Scenario Modelling Tools User Guidance v1.0 | September 2020 23
Economic Scenarios
© 2020. For information, contact Deloitte. Scenario Modelling Tools User Guidance v1.0 | September 2020 24
COVID-19 | Economic scenarios
What the world could look like during and after the crisis passes
Key uncertainties
Two economic scenarios
The next few slides outline a set of scenarios that
describe what the future could hold for New Zealand.
• This section of the report looks at two economic scenarios. The scenarios are designed around three key
• Making the right decision at the right time has never been more uncertainties:
important than now, and good decisions are based on good information.
Scenarios are an appropriate and useful tool to plan as it allows Councils
1
to test long term plans against a number of different outcomes.
• Although the number of scenarios are endless during this time of The effectiveness of the public health
uncertainty, our resulting set of scenarios range from: response and public compliance
• The future we should prepare for (best-case)
• The future we need to avoid (worst case).
• Each scenario considers the likely outcome for the global economy, the
domestic economy and the regional economy.
2
• The scenarios are not predictions about what will happen, they are
hypotheses about what could happen, and are designed to frame planning
The effectiveness of Government
discussions.
economic support
• Three key uncertainties were explored when developing scenarios,
covering the health response and outcomes, effectiveness of fiscal policy,
and outcomes in major trading partners.
• The effectiveness of the health response is highly correlated with the
speed of the economic recovery, where the effectiveness of fiscal
3
stimulus also plays an important role. Meanwhile, the global environment
is considered to be somewhat exogenous to the other uncertainties as
this cannot be controlled by domestic policy. Despite being exogenous, Global economic conditions
the global environment has a significant impact on the recovery of the
regional economy.
25
COVID-19 | Scenario 1
Scenario assumptions
Best Case The public health response is effective. However, there is limited technology
improvement in case detection and tracing and this results in a growth in the number
A slow recovery of cases over time. This COVID-19 scenario is therefore likely to start in July 2021
with a slow economic recovery.
Mapping the scenario against three uncertainties Health
• The success of the Alert Level 4 lockdown allows New Zealand to roll
back to Alert Level 1 for 3 months before a mild second outbreak
Effectiveness of the health response
occurs in mid-late 2020. However, it is contained relatively quickly and
the country is restored to Alert Level 1 by late 2020 and into the
Ineffective Effective foreseeable future.
• A vaccine is found by July 2021 and rolled out by late 2021.
• Borders begin to open in mid-2021 as the vaccine is rolled out.
Effectiveness of Government
economic support Global Economy
• The global outbreak is mostly contained in 2020, after which there is a
slow unwinding of travel bans over the following year.
Ineffective Effective
• China drives global recovery as it is the New Zealand’s largest export
partner (~2 times more exports than the country’s second largest
partner in Australia).
Global economic conditions • Population growth slows given weaker global movement of people.
• Central banks maintain accommodative monetary policy settings
Prolonged
global Effective globally and support liquidity in financial markets
recession recovery
Domestic economy
• The fiscal response focuses on providing income support and limiting
Why is this scenario plausible? business operating costs during the lockdown period.
• Fiscal measures provide some support to households, but
New Zealand is in the process to contain the second wave of COVID-19,
consumption is curtailed. Wage growth comes under pressure given
however globally there is some way to go until the outbreak is contained.
both increased unemployment and cost cutting measures taken during
Technological advances are limited. While the government is spending big, it is
the crisis.
still not enough to avoid low inflation and low investment leading to slow
• The New Zealand dollar comes under pressure and investors flock to
economic growth.
safe havens and the RBNZ works to keep interest rates low through a
Likelihood significant bond buying program.
This scenario is more likely to occur given Government’s response to date and • Consumer and business sentiment remain weak post 2021, limiting
global recovery and global economic conditions. investment and spending in the recovery.
• The health crisis and extended period of work from home 26
requirements results in a population flow out of major cities.
COVID-19 | Scenario 2
Scenario assumptions
Worst Case In this scenario, New Zealand both struggles to contain COVID and the economic
recovery from the recession is delayed. This scenario sees waves of reinfection causing
Sustained economic disruption considerable loss of life and deep economic disruption over a prolonged period.
Health
Mapping the scenario against the three uncertainties • Further outbreak occurs in mid to late 2020 with cases lingering into
2021. Forcing New Zealand to fluctuate between Alert Level 2 and
Alert Level 3/4 until mid 2021 in order to contain the outbreaks.
Effectiveness of the health response • There is a significant increase in demand for mental health services as
prolonged closures result in increased cases. This extends into the
Ineffective Effective recovery, reducing productivity and participation in the workforce.
• Vaccine is found in late 2021 and rolled out early 2022.
• Most international borders remain closed until a vaccine is available
and distributed early 2022.
Effectiveness of Government
economic support Global Economy
• The global outbreak continues to cause difficulties for the economic
Effective
recovery. China experiences a second COVID-19 outbreak which
Ineffective
causes a prolonged economic slowdown.
• Limited export demand from the US and China dampen the speed of
the recovery. In addition, the inability to open borders hurts the large
Global economic conditions tourism sector.
Prolonged • Central banks maintain accommodative monetary policy settings
global Effective globally, with rates lower for longer in the US.
recession recovery
Domestic economy
• New Zealand fiscal response is not strong enough resulting in
Why is this scenario plausible? devastating loss to incomes and widespread job losses.
The COVID-19 pandemic becomes a prolonged crisis as a resurgence of the • Unemployment surges with some industries losing the majority of
virus creating panic and further uncertainty. We are in unprecedented times small businesses.
and small missteps now can have devastating consequences in the future. In • The public loses trust in the New Zealand economy which causes social
particular, people’s behaviour can become exceptionally individualistic when unrest and a sharp drop in spending and investment.
their own or their family’s wellbeing is threatened in the way described in this • Monetary policy remains towards the zero lower bound with strong
scenario. quantitative easing.
• The New Zealand dollar devalues further due to our failed response
Likelihood relative to our global peers, and the country comes under pressure as
This scenario is less likely. New Zealand has social cohesion, an excellent health our credit rating drops and public debt soars.
system, strong Government institutions and healthy Government debt to GDP • Limited travel, reduces population growth. This is exacerbated by27
ratio relative to other advanced economies. lower fertility rates and higher mortality rates.
Regional modelling of labour markets
A high-level overview of how demographic variables and national forecasts drive labour market
forecasts
Key:
• The aggregate labour market (labour force, employment and Consistency analysis
unemployment) are set based on population by age, national
participation and unemployment rates by age, and typical
regional differences in participation and unemployment rates.
• Stats NZ data at the regional level is often inconsistent with
national aggregates for the same industry (and occasionally
data is not reported on a consistent basis for each). We scale
our inputs by region and industry to conform with total Historic employment by
Regional employment by
employment by region and total results by industry. region and industry from
industry
Stats NZ
• Consistency analysis is considered when movements in implied
employment by industry, implied unemployment rates and
underlying demographic trends come into conflict.
© 2020. For information, contact Deloitte Scenario Modelling Tools User Guidance v1.0 | September 2020 28
Regional modelling of economic output (Regional output or regional GDP )
A high-level overview of how regional output projections are derived
Key:
© 2020. For information, contact Deloitte Scenario Modelling Tools User Guidance v1.0 | September 2020 29
Explanation of outputs/nuances
Clarification of key outputs/assumptions
Unemployment
Develop Updated set of Regional Develop Updated set of Regional
Generally, it would not be needed
Economicto Scenarios
look beyond the unemployment rate but in unusual circumstances like during pandemics
Economic the definition of
Scenarios
the rate can come under scrutiny. To be considered officially unemployed, someone who is out of work must be both actively seeking and
3 scenarios, for up to 16 regions 3 scenarios, for up to 16 regions
available for work. The downside
with a of
10 this
yeardefinition
outlook foris that it excludes people out of work who get disheartened with their job prospects and
with a 10 year outlook for
therefore stop actively seeking work. Although
population, other measures such as utilisation and underemployment may show
GDP and employment the impact
population, of the
GDP and pandemic
employment
more widely, unemployment rate was used in the scenario forecasts due to data availability and the fact that it is a conventional measure of the
$35,000 + GST (in parallel with $35,000 + GST (in parallel with
labour market. core model development core model development
2019/2020 forecasts
Due to the timing and nature of Stats NZ economic data releases the 2020 June year will comprise of actual unemployment data but GDP and
population will be forecasted for that year. The year ending June 2019 represents the last full year unaffected by Covid and forms the basis of the
‘pre Covid baseline’. Regional GDP Scenarios are also provided using a 2019 base year to align with the Scenario Modelling tool.
Population
As COVID-19 is likely a temporary shock, albeit being significant in nature, forecasts have assumed that regions will not experience population
exodus. This largely applies to the Queenstown-Lakes region as a large departure of the population which would have altered unemployment
forecasts due to a falling labour force. However, the economic scenarios have not assumed this, therefore resulting in relatively large modelled
increases in unemployment. Population forecasts are also forecasted using net migration, thus factoring in New Zealanders returning from
overseas which partially offsets the fall in immigration.
© 2020. For information, contact Deloitte Scenario Modelling Tools User Guidance v1.0 | September 2020 30
Regional analysis
Regions included in scenario analysis
8.6%
Less than national average
• The map shows high scenario GDP
forecasts and how they may impact
Greater than national average across the various regions across New
9.0%
11.1% Zealand.
10.4%
• The Queenstown-Lakes region has been
New Zealand is forecasted to 10.4%
9.7% specifically split out from the Otago
experience a 9% drop in GDP under
the high scenario 8.4% region as Queenstown has a sectoral
composition that is materially different
from the rest of the region. The reliance
on tourism drives this.
8.5%
• Note that the Otago region also accounts
10.5%10.5%
for Queenstown in its forecasts.
10.5%
8.2%
16.4%
8.7%
10.8%
© 2020. For information, contact Deloitte Scenario Modelling Tools User Guidance v1.0 | September 2020 31
Example region
A spotlight on Bay of Plenty
Economic scenarios have been developed to account for the potential impact of
COVID-19 on regions across New Zealand. This slide presents the scenario outcomes Bay of Plenty - real GDP, % change
for the Bay of Plenty (BOP) region. 15%
Regional GDP Develop Updated set of Regional 10%
• The high scenario forecasts a rebound in GDPEconomic
for BOP Scenarios
in 2021 and 2022. The low
5%
scenario GDP contracts significantly over two3financial
scenarios, for upbefore
years, rebounding in
to 16 regions
2021-22. Demand and supply side constraints with a 10 year outlook for income and
in the form of lost 0%
unemployment, and lockdown and border closures respectively,
population, add to the slump
GDP and employment -5%
in the economy. GDP never rebounds enough to recover the economic activity
$35,000 + GST (in parallel with
forfeited in 2020. -10%
core model development
Unemployment rate -15%
• In the high scenario unemployment is forecasted to remain elevated for some -20%
time as the impact of COVID-19 structurally damages industries. The low scenario
-25%
expects unemployment to remain at historically high levels until 2023-2024.
Population
• The high scenario projects that BOP’s population growth returns to pre-virus Low Scenario High Scenario
Source: Stats NZ, Deloitte analysis
levels in 2024-2025 while the low scenario returns to pre-virus levels in 2025-26
caused by a delayed vaccine release and borders opening.
Bay of Plenty - unemployment rate (%) Bay of Plenty - change in population, persons
13% 7,000
12%
6,000
11%
10%
5,000
9%
8% 4,000
7%
3,000
6%
5%
2,000
4%
3% 1,000
Employment
The regional model have the ability to break down employment forecasts by region and ANZSIC06 industry
Example: employment in the agriculture, forestry and fishing industry in Northland
Regional GDP
The GDP iteration of the regional model allows forecasts to be broken down by region and ANZISC06 industry
Example: GVA (gross value added i.e. contribution of a sector to GDP) for education and training in Wellington
© 2020. For information, contact Deloitte Scenario Modelling Tools User Guidance v1.0 | September 2020 33
Data sources
A breakdown of the data used for the economic scenario forecasts
Stats NZ – Infoshare Labour force status national, annually National forecasts 1987-2019
Stats NZ – customised request Employment by ANZSIC06 industry national, quarterly National & regional forecasts 2003-2019
Stats NZ – customised request Employment by ANZSIC06 industry by region, annually Regional forecasts 2009-2019
Stats NZ – customised request Labour force status by region, annually Regional forecasts 2001-2019
Stats NZ – customised request Regional GDP by ANZSIC06 industry, annually Regional forecasts 2003-2018
RBNZ - MPS Baseline scenario forecast for GDP and unemployment rate Sense check for national scenario forecasts Dec 2019,
Aug 2020
© 2020. For information, contact Deloitte Scenario Modelling Tools User Guidance v1.0 | September 2020 34
Appendices
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Frequently Asked Questions
© 2020. For information, contact Deloitte Scenario Modelling Tools User Guidance v1.0 | September 2020 36
Terms of use of the scenario modelling tools
The scenario modelling tools have been commissioned by DIA and developed in conjunction with Deloitte for use by local authorities
based on information held by DIA, regional economic impact scenarios developed by Deloitte and a range of public sources. However,
the scenario modelling tools have not been developed to meet the needs of any specific local authority and local authorities using the
scenario modelling tools do so at their own risk.
DIA permits local authorities to make use of the scenario modelling tools on the following terms:
• In no way does DIA or Deloitte guarantee or otherwise warrant that any financial forecasts scenarios of any entity will be achieved.
Forecasts are inherently uncertain. They are predictions of future events which cannot be assured. They are based upon
assumptions, many of which are beyond the control of the local authority and its management team. Actual results will vary from
the forecasts and these variations may be significantly more or less favourable.
• Users of the scenario modelling tools do so at their own risk and acknowledge that neither DIA nor Deloitte have provided any
specific advice to the user and neither DIA nor Deloitte accept any duty of care to any user who relies on any of the scenario
modelling tools.
• Neither DIA nor Deloitte makes any representation of the accuracy of data contained on the dashboard that has been provided
from other agencies or public sources.
© 2020. For information, contact Deloitte Scenario Modelling Tools User Guidance v1.0 | September 2020 37
Restrictions on use of the Regional Economic Scenario Forecasts
Deloitte Access Economics has developed the regional economic scenario forecasts contained in the dashboard as at September 2020.
While Deloitte believe the scenario forecasts are a reasonable assessment of prospective trends in the relevant economies, due to the
severity and duration of the pandemic being unknown, the forecasts are subject to forces others than economic factors, which is not
normal. The scenario forecasts consider, where possible, the potential impact of Coronavirus (COVID-19) on the relevant economies. At
the time of the publishing the forecasts, the situation is continuing to evolve, and many uncertainties remain as to the effect the
COVID-19 crisis will have on the on the domestic and regional economies. Accordingly, the forecasts do not fully identify and quantify
the impact of all COVID-19 related uncertainties and implications. Changes to market conditions could substantively affect the on the
economies. These forecasts are best understood as a ‘most likely’ outcome around which unexpected (or unprojected) events will
produce different outcomes.
The Regional Economic Scenario Forecasts have been developed using a combination of publicly available data and proprietary Deloitte
economic models. It may be possible to provide more detailed economic analysis of a specific sector or region, with access to
additional local data and additional analysis. Please contact Liza van der Merwe from the Deloitte Access Economics team if you would
like to discuss this further.
© 2020. For information, contact Deloitte Scenario Modelling Tools User Guidance v1.0 | September 2020 38
Data Sources
Other than the Regional Economic Scenario Forecasts, which have been developed by Deloitte Access Economics, all
other data sources included on the dashboard have been provided from the following agencies: Statistics NZ, MBIE,
MSD, Ministry of Health, and RBNZ. In some cases, the data sourced from public sector agencies may in turn be
sourced from other sources (such as ANZ economic confidence indices). In some cases, the data is provided by the
agency publicly and has been re-represented on this dashboard for convenience. In other cases, the agency has
provided data in a format that is relevant for this project, eg with additional granularity at the local authority level. Any
further updates to the dashboards will depend on the agencies continuing to provide the existing data in the current
format.
One of the key data sets used in this dashboard is sourced from Stats NZ's COVID-19 data portal, which gathers key
high-frequency and near real-time economic indicators to help track the impact of COVID-19 on the economy. A
subset of the data sets from this data portal are presented on this dashboard, focussing on key economic indicators
and data sets that are available at a regional or local authority level of granularity. The full data portal can be accessed
here: https://www.stats.govt.nz/experimental/covid-19-data-portal
© 2020. For information, contact Deloitte Scenario Modelling Tools User Guidance v1.0 | September 2020 39
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