NZI has suggested that unemployment may go over 11%. Now although it sounds like this estimate is no more than random conjecture (the countries in the Rogoff study are not comparable to the New Zealand case), it is still worth putting what this means in some historical context.
The time axis above gives us the “number of quarters”.
So during the recession of the late 80’s in NZ, when we suffered a massive shock to wealth (falling stocks), bank failures, threats of a credit downgrade, tightening fiscal policy (because of our high sovereign debt), tight monetary policy, a falling terms of trade, structural adjustments in the economy (as we dumped tariffs etc), and we had relatively inflexible labour and goods markets – unemployment peaked at 10.9%.
Now even if we believed the situation in NZ is as dire now (I think it is in some places overseas – but not here) it is important to note that it took five years for unemployment to get from 4% to 10.9%. Even in a worst case scenario I think we can expect the adjustment to be similarly elongated this time.