A couple of weeks ago I signed up to follow the Ministry of Health on Twitter.  Seemed a sensible thing to do: coronavirus and all that.

Since then I’ve been interested to watch their messaging very slowly change.  Two weeks ago (28 February) was when the first New Zealand confirmed case was announced.   We got this

By the next day they were so relaxed about the virus they took to tweeting woke public service stuff

Pretty sure that even then the disease had killed a lot more people than “fears, rumors & stigma”, but…well…presumably that wasn’t Dr Bloomfield’s view.

On 1 March, we had the “wash your hands” message

and there wasn’t anything on 2 March.

But by 3 March, it was time for some more off-topic political rhetoric from another government agency. the Ministry retweeting this.

Here was the 4 March messages

Never have they given us anything substantial to justify their view that the “risk of widespread community outbreak” not only is low, but is expected to remain low.   Small matter of all those other countries, including ones that had much the same border restrictions we did.

By 5 March we had

Probably (a) really up to the public, and (b) any reviewers when this is all over, to decide whether things are being well-managed, but we know that the Ministry’s prime communications objective (stated in the pandemic plan) is to maintain confidence in themselves, whether justified or not.

Also, much as we might sympathise with that family, surely the Ministry of Health’s prime task isn’t those individuals but the safety and wellbeing of the wider public?

There wasn’t anything much on their feed for a few days, but then there was this

Which displays no sense that the Ministry recognises that while it knows about the cases it knows about, it doesn’t know what it doesn’t know. There was also this.

Given the rate at which the virus was spreading globally, it wasn’t clear quite what evidence they had for their misinformation claim.

(Although perhaps they had in mind the Director-General’s several claims around the time that asymptomatic transmission of the virus simply isn’t a thing, a stronger statement that what was made in the WHO report he claimed to draw on, and not consistent with the views of a bunch of other international experts.)

And by 10 March we have this

Talk about confidence: “just wash your hands and don’t worry”.   Oh, and by the way we are so confident there is no risk that they actively advise people not to “stock up”  (not even just “not panic buy”).  I imagine most people have done as I have and ignored their advice.  After all, wouldn’t want chaos in supermarkets if/when community outbreak becomes a thing or when much greater social distancing is mandated.

Here they are on 11th. Public events finally come into view.

Then yesterday, there was a change of tack from the Ministry

The “risk is low” message had been dropped, and the asymptomatic transmission message had been toned down.

And what of today, the 13th?

The ground seems to have shifted quite a bit.  No attempts to downplay risks, no reaffirmation of the risks being low, just some advice about hygiene etc things to think about in deciding whether or not to go.

And to read Dr Bloomfield’s press release today there is also quite a different tone coming through

“Our key advice, which is fundamental to our response, is not putting yourself or others at risk if you are unwell. This means not going to work or going to places where there are other people if you are sick. All of us have a role to play in stopping further spread. I need to emphasise how critical this is as New Zealand responds to COVID-19,” says Dr  Bloomfield.

‘This is particularly important for concerts and other large gatherings we have coming up, including this weekend. Please stay home if you’re unwell.’

Having said that, I went and looked at the Ministry’s website, and there it still says

With continued vigilance the chance of widespread community outbreak is expected to remain low.

But with not a single sentence to justify the Ministry’s view.

People seem to speak highly of Bloomfield. Personally, I tend to be a bit sceptical of anyone appointed by Peter Hughes (State Services Commissioner) and as a mere curious citizen haven’t seen anything much to allay my unease in the last couple of weeks.  In its public communications, the Ministry seems constantly to have been playing down risks as much as they can –  even as the global situation deteriorates rapidly, and Australia’s situation worsens.    It seems fundamentally unserious and it seems not at all consistent with the ideas of an open society, transparency and challenge.    And frankly it undermines confidence in whatever the Ministry will be saying through the next phases of this crisis.  Whatever actual expertise some of them no doubt have, they risk coming across as unserious and not interested in levelling with the public.  (Same goes for some of Bloomfield’s comments about some east Asian countries that seem to have checked their outbreaks for now: no sense of engaging with the public as to what it would take (resources, commitment, compliance etc) and for how long, to even hope to emulate those stories).

Wouldn’t it have been good to have seen the Director-General engaging on, for example, the deterioration in the Australian numbers, directly confronting the facts that (a) there is an open border between the two countries, and (b) a fair amount of travel each way all the time and addressing the implication that we might, in effect, really be considered as being in a Common Virus Area with Australia.  If so, the complacency about New Zealand risk might be particularly worth challenging.

And wouldn’t it be good if Bloomfield –  or the Minister of Health or the Prime Minister –  fronted with the public about the very real challenges the health system will face if we get a serious outbreak here (low number of ICU beds per capita, looking at the Italian experience etc).  That is what good, honest, effective-over-time communicators would do. It is the sort of thing that over time builds confidence: a view that, for example, while officials may be optimistic now (rightly or wrongly) they have thought hard about what might happen, and aren’t just trying to sugar-coat their messages and keep the public quiescent.

Wouldn’t it be good if they could effectively and openly articulate for the public the “flatten the curve” strategy that drives so much of what is going on?

I really hope that what we don’t see is better than what we are seeing.  Because what we are seeing seems complacent and uninterested in genuine openness and engagement.  And that is no way for a democratic society to be operating, in which we simply defer to officials, take what they tell us only when they tell us, and not bother our pretty little heads about other stuff.

 

Here in New Zealand we are waiting for the details of the government’s promised economic package, which –  we are told –  will be tightly targeted and focused on the industries that particularly suffered from coronavirus.

Even to write that sentence, is to recognise how absurd a position the government has put itself in.     They seem –  no real doubt about it, their own words say as much –  focused almost wholly on the firms/sectors that suffered from China’s experience with the coronavirus, even as something so much bigger is already beginning to sweep over us.  China, after all, if not remotely back to normal, is offering practical assistance to Italy.   That outlook was something the Minister of Finance and, even more so, the Prime Minister have consistently refused to face.  Perhaps they’ve known it internally –  there must, surely, be some good adviserssomewhere –  but nothing they’ve said in public has prepared New Zealanders for the reality of what is unfolding, and what is likely to happen in the coming weeks and months.  (Our media don’t seem that much better: the Herald today has a full page story on the front cover “The World Faces Reality”, but readers will still have little or no sense that the economies of many countries are about to substantially shutdown.)

Whether or not we get serious outbreaks here –  and who aside from the Ministry of Health would be willing to punt on us not – the New Zealand economy will be severely –  really really severely –  adversely affected.   And there is very little that economic policy tools, macro or micro, can do to lean against or mitigate that loss.  Economists have talked for years about the benefits of exchange, specialisation, personal interactions etc etc.  But for the next few months the emphasis seems likely to be increasingly on keeping your distance, hunkering down.    Huge amounts of output just are not going to happen, and there will be hardly a firm or sector not really severely adversely affected.

Whether or not the government’s plans were reasonable when they were first being conceived –  and just perhaps they might have been six weeks ago –  surely now is the time to bin that package they were planning to announce next week.  They need to start over, facing the reality now before us, not the (now rather limited) shock that first faced us (and certainly hit some individual sectors hard).

Sensible policy responses now –  whatever they choose to do around further border closures –  look much more appropriately focused on immediate crisis management.  In other words:

• ensuring the income support is going to be readily and effectively available for the many (especially low income) people who won’t be able to work from home or who will have exhausted their sick leave (and any ex gratia generosity employers may still be able to offer). That might require legislation: if so, pass it,
• ensuring that the food distribution system is going to be reasonably robust if we go through closed-down periods (in an early post here, I recounted an anecdote from an early phase of pandemic planning that scared me then: big supermarkets typically only have 1.5 days of sales in stock at any one time),
• spending/doing whatever can still usefully be done to prepare for possible severe health system stresses (rather than just happy talking the public about how well prepared they are –  for 100 cases I’m sure, but not for several thousand).

and so on.

Now, sure there are probably other things to do.  The Reserve Bank should be cutting the OCR (for all the reasons I outlined yesterday) and they need to be prepared to roll out liquidity support type operations if financial sector funding stresses start affecting banks here.

But you simply cannot plan to target individual firms, when almost every firm is going to be engulfed.  It would inefficient, unmanageable, and would simply to fail to recognise the magnitude of the coming losses.

And there is no point in thinking of huge fiscal outlays, as general stimulus, right now.    If the government was going to plan to actually purchase physical goods and services well (a) what would it do with them?, and (b) soon enough, the capacity of the economy to deliver much (workers at work, functioning distribution systems) are going to be severely impaired.  And – the more likely option –  simply putting money in people’s pockets, whether by cash grants or tax cuts (GST or low income thresholds on income tax) aren’t likely to achieve much systematically useful either.   For a start, if you are sensible then in such a climate you won’t want more people eating out (say) or moving around holidaying, or going out to big sports matches or concerts (classic discretionary items).  And even if online retail really was still fully functional locally, it just isn’t that large a share of New Zealand retail.  More generally, quite-rational fear and uncertainty about the future will have people pretty reluctant to spend anyway.   That is sensible and prudent, and not really something governments should now be trying to undo –  even if our happy-talking Prime Minister was the other day encouraging people just to go out and spend.       We need to start thinking in terms of the deepest contraction in economic activity any of us –  except perhaps the handful still alive who experienced the Great Depression-  have ever seen.  It is the price the world is going to pay to “flatten the curve” (something we’ll come back to).

Big stimulus is probably going to be appropriate and required as and when the worst of the virus is past us, and people are genuinely and rationally able to see some light at the end of all this, building on the fundamentals already at work by then, speeding up the recovery.  Ideally, that would be a mix of fiscal and monetary policy, bending over backwards to help get economic activity levels back to normal.  So use the time now –  you’ll have plenty –  to prepare for that sort of strategy  (and perhaps for the inevitable bailouts and recapitalisations our politicians will find themselves unable to resist –  anyone suppose that if it comes to that governments of either stripe would let Air New Zealand fail (but I hope at least they wipe out the private shareholders if it does happen)).   It might even be time to consider changing a few individuals at the top (poor generals are found out in wartime and, in good armies, quickly replaced).

On the fiscal side, make sure  –  for example –  that a universal lump sum cash payout to all residents could be made (from the outside hard now to see how it could be done).  Ensure that a temporary GST cut could be implemented quickly and smoothly.  And insist that the work is done to largely remove the near-zero effective bound on lower interest rates. It can be done  –  it should have been done, here and abroad, five years ago –  and failure to act will simply unnecessarily hold back eventual recovery (and reinforce those downside risks to inflation expectations that I’ve often worried about here).

One of the key things we all have to recognise is that this situation is not going to be resolved any time soon.  For hints of that we can look to China.   Sure the new case numbers and new deaths have come right down –  more infections this week, I think, from arrivals from other countries than locally –  but nowhere are things back to normal. In Wuhan it seems that recovery has barely even begun.  Look at successive waves of things like we are now seeing on Italy –  or early signs in other countries too –  and there is going to be no confidence (including about travel) and no certainty for a long time.

But perhaps even more importantly, remember that the virologists etc talk about the goal of current interventions being to “flatten the curve” .  This is perhaps the best version of the stylised chart I’ve seen, in a new article from the economist Richard Baldwin.

Perhaps it is a little cluttered, but it is trying to convey a lot of information.

The solid red line is a stylised representation of how new case numbers would look if there was no containment (given that there is no effective treatment).  You’ll have heard of experts talking of how if that happened perhaps 50 per cent of the world’s population would be infected before too long, since none of us has any natural immunity and the virus seems to spread easily.

The real worry in that scenario is the dotted red line –  people needing ICU-level care.   And this perhaps is where the chart is too sanguine.  On this version, the area under the dotted red line, and yet above the ICU bed capacity, is small relative to the total ICU demand.  But if 5 per cent of cases need ICU-level care (seems about right from what I’ve read) then it is worth remembering that New Zealand, for example, has about 175 ICU beds.   Perhaps with valiant efforts those numbers could be doubled in an emergency –  but doctor numbers can’t – but even that would mean that, if no one else was in an ICU bed at all, our system would be overwhelmed at 7000 cases at the same time (5 per cent of 7000 being 350).  That might seem a lot of cases, but recall that 50 per cent of New Zealand’s population is 2.5m people.

So trying to flatten out the curve is about trying to avoid the forced medical rationing already evident in the high-quality northern Italy health system and, presumably in the process, reduce the overall death toll (very old people will get treatment and as a result some will live who might otherwise have to be left to die). If the curve could be flattened out, by aggressive containment etc measures, the aim –  highly stylised –  is to produce something like blue line, where the ICU demand never quite exceeds the physical capacity.

But what isn’t often mentioned –  although it is quite clearly implicit in the stylised chart –  is that the aggressive containment measures don’t necessarily alter the likelihood that –  at least unless there is a widespread vaccine available next year –  many of us will still get it in the end (something like 50 per cent is still the number  – the sort of thing Angela Merkel said to the German people the other day).  It is just a matter of time, of stretching things out, and (thus presumably) of repeated waves or outbreaks in different physical locations.  Take Italy as an example, the current situation looks horrendous, but case numbers are not even close to 1 per cent of the population.

And, unless that narrative changes markedly as we learn a lot more, that seems likely to be the sort of scenario every country faces, in one form or another, for the time being.  There is nothing to suggest –  since no likelihood of a vaccine in that time –  that the problems/risks/disruptions will ease this year.  And the end of the year is still 9 months away.   Turning back to the economics, a great deal of economic output and wealth can, and probably will, be lost in that time.  It means –  sadly –  that there is likely to be plenty of time to think about planning for serious stimulation as we get to a recovery phase.   How many people are going to be keen to book travel, even if borders stay open or re-open and flights are still there?  How many people are going to be keen to spend (precautionary savings will look very rational for many if they still have an income)?  And who is going to be ready to commit to start investment projects, even if either debt or equity funders were willing to release the funds needed?

It isn’t hard at all to see New Zealand’s GDP for the rest of the year being perhaps 10 per cent lower than otherwise (that isn’t a forecast, just an attempt to suggest that the ballpark numbers people should be working with are very very large.  That alone would $25 billion of income lost that is mostly never coming back – even if next year we resumed the pre-crisis growth/income path – and losses which have to be (a) borne and (b) distributed. There will be significant business failures. There will be heavy job losses.  And, despite my scenario, it is not as if anyone –  government or private –  can safely plan on the losses being limited to this year and everything being pretty much normal thereafter.

There is a pressing need for the Prime Minister and the Minister of Finance to get real about the magnitude of the economic (and probable social) disruption we are going to face, the price we pay –  even though much of it will be out of New Zealand’s control –  to manage the virus.  Front the public and explain why now is no time for a limited backward-looking package, but for something much more dramatic and whole-of-nation crisis focused, with a time horizon that stresses that “normal” will almost certainly be some considerable time away.