New Zealand's health response to the COVID-19 pandemic might have been successful, but an economist says there's still "a lot of pain to come" for businesses and workers and that could have a big bearing on the general election.

The Organisation for Economic Cooperation and Development (OECD)'s latest global outlook has showcased the momentous economic impact the pandemic will have on countries around the world. 

In terms of 2020 projected change in GDP, and assuming there's just a single wave of COVID-19 and lockdowns, the United Kingdom comes out worse with a contraction of 11.5 percent. If there is a second wave before the end of the year, Spain is overall worse off with a contraction of 14.4 percent. 

The OECD says our "swift and decisive response… successfully contained the virus outbreak, saving lives and allowing the economy to reopen faster".

"The COVID-19 pandemic is a global health crisis without precedent in living memory. It has triggered the most severe economic recession in nearly a century and is causing enormous damage to people’s health, jobs and well-being," the OECD says.

According to the OECD, New Zealand's GDP will shrink by 8.9 percent, or 10 percent if there is a second wave. It's forecast to return to pre-COVID-19 levels by the end of 2021 if there is just one hit.

The OECD says our "swift and decisive response… successfully contained the virus outbreak, saving lives and allowing the economy to reopen faster".

"However, confinement brought a number of sectors to a sudden stop in the second quarter.

"The economic recovery will be supported by substantial fiscal and monetary stimulus, but will remain sluggish, as high unemployment and weak business confidence hold back domestic demand and export growth is stymied by the collapse of international tourism."

At the Budget in May, Treasury forecast unemployment to peak at 9.8 percent in New Zealand by September. It projected annual real GDP growth of -10.3 percent in December 2020. 

Economist Shamubeel Eaqub told The AM Show that the OECD report showed two things.

"First, there is still more of this recession to unfold. Just because the health crisis is over doesn't mean the economic crisis is over," he said.

"The second part of it was we are probably going to do a hell of a lot better than many other countries, particularly those that are going to see the second wave of infection."

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Eaqub agreed that if New Zealand's major trading partners do suffer a second wave, that is bad news for us. 

"Even though our domestic economy can start to recover, despite the unemployment and job losses, what we know is that our exporters will face a very uncertain and volatile outlook. There is still a lot of pain to come. There is still a lot of volatility and uncertainty to come." 

With New Zealand 100 days out for its September 19 general election, the unfolding economic impacts will be influential. 

"When you are living here, and you have got 100 days to the election, the job losses and the business failures will play a big part in exposing the kinds of conversations we need to have in the election that's coming up," Eaqub said.

With New Zealand 100 days out for its September 19 general election, the unfolding economic impacts will be influential. 

"This recession is going to rip off the band aids off all the kind of divisions that we have seen in New Zealand. Whether it is between the rich and the poor, between rural and urban, between renters and owners. All of that stuff is going to come to the fore."

The OECD mentioned in its report New Zealand's massive wage subsidy - which has extended past the June cut-off date for some businesses - loan guarantee schemes as well as tax flexibility as helping cushion the economic blow. 

The report says New Zealand should continue with its health response to keep the virus at bay. If the Government needs to restart the wage subsidy, "it should spread payments to ensure that they are made only if employees continue to be paid and also increase the share of costs borne by employers over time to reduce the risk of workers being trapped in jobs that are no longer viable".

Eaqub is speaking at this week's Visionweek event, which has a theme of "what next for New Zealand?". He said New Zealand doesn't make transformational changes and has historically instead focused on incremental changes. 

"We need courageous and bold vision. If you think of things like climate change, if you think of generational welfare, this is stuff that is not going to be fixed if we keep doing it in the incremental process we have."

His focus will be discussing the need for a more generous welfare system as well urgently acting on climate change.

Find the OECD's full June report here, while it's section on New Zealand can be found here.