Y2K to cost economy $100 each: Treasury

Treasury's long-awaited report on the potential damage Y2K could wreak on the New Zealand economy has finally been released, and the bottom line is: it will cost the equivalent of $100 for every person in New Zealand. Beyond that, Treasury says it doesn't know.'This is a highly speculative and imprecise exercise,' says the report.

Treasury's long-awaited report on the potential damage Y2K could wreak on the New Zealand economy has finally been released, and the bottom line is: it will cost the equivalent of $100 for every person in New Zealand. Beyond that, Treasury says it doesn't know.

"This is a highly speculative and imprecise exercise," says the report, put together by the New Zealand Institute of Economic Research and PricewaterhouseCoopers.

But the report does say some companies will be at risk from Y2K-related failures.

"Failures are inevitable, some in critical systems, with serious implications for individual businesses and other organisations," says the report.

However, Treasury doesn't think this will have a major impact on the economy as a whole and expects no more than 0.3% to be shaved off New Zealand's GDP, comparable to around $350 million.

One of the biggest problems facing New Zealand businesses, from Treasury's point of view, is the potential lack of professionals to fix the problem.

Our size and relative isolation could also pose a problem, as we are exposed to the vagaries of the Asian market — far more so than Europe or the US.

"As a small open economy, New Zealand may be more exposed than larger OECD countries to year 2000 problems amongst its trading partners."

Firms with fewer than 250 employees are also considered at risk. There is "considerable doubt" about the level of awareness and preparedness in these small to medium-sized enterprises.

The report says the major concern "here and overseas is with the state of readiness of course service providers".

Electricity, gas, telecommunications, water, waste-water, transport, health and emergency services are all considered key and, as the report points out, "even a fairly brief breakdown in any of these can cause widespread disruption".

But any potential problems post-Y2K are balanced by the pre-Y2K surge in spending.

Treasury expects the "just-in-time" business plan to be replaced with a "just-in-case" practice that should see spending increase in the near term.

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