Coronavirus economics and policy: April Fools’ edition

Sadly, of course, we don’t wake up this April Fools’ morning and learn that the last quarter has simply been a huge and dreadful illusion.  We really are in the midst of a pandemic.

Unfortunately, we also wake up and realise afresh just how irresponsible some of the economic policy choices the New Zealand government has made in recent weeks have been, as they lagged badly behind in recognising the severity of what was breaking over us.   The government’s key economic figures, the Minister of Finance, the Secretary to the Treasury….oh, and Phil Twyford….are apparently fronting up to the Epidemic Select Committee this morning.  I hope ministers are grilled on these points.

First, we had the decision to push ahead with a further large increase in the minimum wage (from today), in a country where the ratio of minimum wages to median wages is already among the highest in the OECD, at a time when unemployment is rocketing upwards and the earnings capacity of the country has plummeted (partly, most recently, as a result of government choices, but realistically mostly because of stuff simply outside New Zealand’s control).   Perhaps one might have been able to defend such a decision six weeks ago when it might have seemed to wishful ministers not taking the threat seriously –  as indeed the Ministry of Health evidently was not – that it was just a China thing and any adverse economic effects would be small, concentrated, and shortlived.  It makes no sense whatever today.  It is a pure act of ideological self-assertion –  from a government that at the same time runs relentless propaganda urging us all to “unite”.

Things are so bad right now that perhaps the higher minimum wage won’t lead to many additional job losses right now: if your revenue has fallen 90 or 100 per cent, a higher wage rate for staff you can’t afford anyway is more or less irrelevant.   But it is an additional cost on employers at a time when for most firms profit is non-existent, at a time (as it happens) when it is very difficult to spend much money at all anyway on anything other than food and rent.

But where the increase will start to matter a great deal more is in the months and years to come.  Again, if the government once assumed the unemployment rate would barely rise, they’ve known for weeks now that any such view was simply deeply deeply wrong.  We’ll be trying to get people back into work, starting from a peak unemployment rate that may soon surpass even the Great Depression peaks, and as I noted yesterday it is ludicrous to suppose that getting back to full employment is going to be easy or quick.  The minimum wage decision makes it that much harder, and the burden will fall most heavily on the people least equipped to do well in the labour market, whom employers just won’t need to, and typically won’t be willing to, take a punt on.  Oh, and realistically the whole economy is going to be on a lower path of income per head or labour productivity (earnings capacity) than any ministers envisaged when they first rashly promised these successive increases.

If anything, we want to get price signals positioned in a way that is most supportive of as fast a return to full employment.  There are macro policy aspects to that –  eg interest and exchange rate – but minimum wage rules are also part of the mix.  On current policy settings, the government seems determined to hamstring the private sector led rebound.

And then there were those permanent worsenings in the fiscal position implemented as part of the economic package a bare two weeks ago.   In the face of what was very obviously coming, both the bulk of the business tax changes and the permanent increases in welfare benefit rates were almost reprehensibly irresponsible.  Here is what I said at the time

But the increase in welfare benefits now is much more pernicious than that.  Life on a benefit isn’t easy (and before anyone scoffs about what do I know, that isn’t just rhetoric: I have a close family member living on a long term benefit).   But what beneficiaries at least had going for them this year was certainty of income: the government was not going to default or closedown, unlike many private sector employers (with the best will in the world on their part).  They and public servants were safe.  And yet the government chooses to lock-in a permanent boost to its spending commitments (a) to those with the least degree of income uncertainty now, and (b) when the country is in the process of becoming a lot poorer and scarce resources need to be used wisely.   Raising benefits might or might not have been a reasonable luxury in settled times.  It is simply irresponsible and evidence of fundamental unseriousness to do so now.  (And before anyone tells me about the high marginal propensity to consume that beneficiaries have, let me remind you that now is not the time for stimulus or encouraging people to spend more: instead we are entering a phase of deliberately choosing to shrink the economy to give us the best hope of fighting of the effects of the virus).  Oh, and the unemployment rate is going to rise a lot, and one of the big challenges after this is all over is going to be reconnecting people with the labour market, at a time when wage inflation will have been depressed anyway.  In that context, higher benefit replacement rates (relative to wages) is really the last thing that makes sense in getting the economy back on track.

We are poorer as a nation –  very considerably poorer so for the time being –  and yet the government splashes permanent increases on one of the only groups in the country whose real incomes this year are actually secure.

But it isn’t some April Fools’ joke, it is fiscal and economic policy as delivered to us by the Labour/NZ First (and Greens) government.

I could go on, reprising themes from recent posts.   In many ways Grant Robertson has always just been Mr Conventionality when it comes to economic policy –  happy to go along with whatever establishment thinking is for the moment.    That was true pre-crisis –  whether, for example, you liked the Budget Responsibility Rules or not, the conventional wisdom did; whether you thought something really needed to be done about our utterly dreadful productivity growth record, the conventional wisdom was content to tinker (and The Treasury was worse, content to play with its Living Standards Framework distractive toys).

But exactly the same Mr Conventionality is one display now.  He is content to sit by, not even saying a word let alone using his statutory powers, about his Monetary Policy Committee simply refusing to cut interest rates in face of the biggest slump in modern history –  because establishment thinking tells him there is nothing there, the same sort of establishment figures so wedded to the Gold Standard pegs in the early days of the Great Depression.    Sure, fiscal policy today looks very different than it did even a month ago, but not in any surprising, bold or innovative ways.  The wage subsidy scheme doesn’t run for long, is now quite ungenerous by international standards, and there is no sign at all that the Minister has grappled at all with the nature of the extreme uncertainty that all businesses are facing.   And perhaps as bad, the government seems much more interested in bail-outs for big and prominent companies than it does in something systematic and economywide.   But it is those big companies who will have the ear of ministers and senior officials, who will get the media coverage.    Small firms typically don’t (in the same way grieving families barred from any sort of funeral, no matter how small or distanced, outdoors, don’t command the attention of this government).  That big company focus –  case by case consideration of individual big firms, presumably with little transparency and no accountability –  is reflected in stories online this morning (sorry, can’t immediate re-find the link).

And if there is a strategy it appears to be infrastructure, infrastructure, infrastructure…..without much regard for the twin facts that (a) whatever infrastructure projects might have passed decent cost-benefit tests six months ago now (a subset of those actually approved), fewer will today, and (b) relatedly, whatever we thought we needed six months ago, we will need less in the next few years.   I’m not opposed to sound infrastructure projects getting accelerated go-ahead, in principle, but if the government believes high-speed rail from Auckland to Tauranga or Hamilton, or lots more Island Bay cycleways, are the answers, they will simply be on the path to making us poorer.

There has been much comment from Labour ministers evoking Michael Joseph Savage in recent weeks. I know he is some sort of Labour icon –  I’m always surprised that some friends of ours still have his photo on their wall – and no doubt there were a handful of good things done on his watch. But, as a reminder, the Savage government had almost nothing to do with New Zealand recovering from the Great Depression – it was almost wholly over in New Zealand by December 1935 –  and its reckless macroeconomic policies ran New Zealand into such a serious financial crisis in late 1938 that we ended with tight exchange controls –  government permission for your overseas magazine subscription or your holiday or your retirement investment portfolio –  for the next 45 year, and only narrowly averted a much more serious default on the government’s debt that anything that actually occurred during the Great Depression itself (and we weren’t spared that by decent New Zealand management, but by the grace and favour of the UK government, concerned not to severely dislocate New Zealand when the war was likely to be only months away).   Labour might have a sentimental attachment to the man –  who seems mostly to have been a decent sort as an individual –  but it is distinctly unnerving when one reads senior government figures, including Grant Robertson, evoking those times and policies as an example for now.  Did I mention that part of what that government kicked off was the retreat from the world –  going into the 1930s we had probably the highest per capita exports of any country.  This time we start already having the lowest share of GDP accounted for by exports of any modestly-sized advanced country.   We need an outward focus, as much as possible, to whatever extent is reasonably possible, not a guiding philosophy that thinks we can get rich mostly, as a very small country, simply by taking in each others’ washing.

The government has done very poorly so far on the economic response to the crisis.   That needs to change urgently.  It isn’t promising when media report, as the Herald did this morning that the focus is still on a Budget six weeks away.

They have also been extraordinarily non-transparent.  One might think that the best way to build and retain trust, and develop confidence in your strategy, would be to pro-actively all the advice and memos the government has received in formulating policy –  it would also be less labour intensive than responding to the avalanche of OIA requests that is becoming increasingly inevitable.   But, as far as I can see, we’ve seen nothing at all of The Treasury’s analysis and advice on the economic implications and options.

 

 

 

59 thoughts on “Coronavirus economics and policy: April Fools’ edition

  1. I can guarantee if this level 4 shutdown continues beyond week 4, you can start counting suicides from small businesses in the thousands. Or the government will just ridiculously stupidly keep harping about the 1 death from Covid19 as the most stupid justification for culling 5 million people?

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    • To put things into perspective…
      While the absolute numbers for the Covid-19 related mortality in Italy are very high indeed, the total mortality in Italy for 2018 was recorded at 10.5 deaths per 1000 inhabitants. Corresponding figures for 2019 are 10.7 deaths per 1000 inhabitants. These numbers do not include Covid related mortality. Current mortality due to Covid-19 is 0.206 per 1000 inhabitants (as per worldometers.info statistics). Yet, the Italian practice is to record all deaths, regardless of co-existing morbidity factors, as due to Covid alone. Perhaps we have chosen a sledge hammer to kill a mosquito?

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      • Comparing figures for a year with figures for Covid-19 is confusing. The first case in Italy was Jan 29th. If you take yesterday’s 835 deaths and multiply by 365 it calculates to a rate of 5 per 1000 per annum. You correctly point out all deaths where Covid-19 is involved are asigned to Covid-19 but many deaths ought be assigned to a variety of interacting factors: smoking, alcohol, overwork, diabetes, blood pressure, heart issues, food alergies, etc and just simple old age. So you could easily half the numbers for Covid-19 mortality and I’d accept them; however it is not just mortality; a person surviving a serious attack of Covid-19 that required hospital treatment would not appreciate their distress being called a mosquito.
        After this epidemic it will still be difficult to estimate the mortality rate because the public has changed its lifestyle, partly enforced by the lockdown. There are likely to be changes to mortality rates for road accidents, air pollution, stress, homicide, suicide, etc. Britain went into WW2 with many conscripts rejected because of ill health and ended the war with rationing of sugar, meat and dairy but the fittest they had ever been. Maybe with fast food unavailable Kiwis will stop being an obese nation?

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      • Good data site, interesting site can get the infected rate per million people for each country , puts things into perspective italy 178 spain 139 us 7.58 china 2.3 Australia 0.63 NZ 0.21 30th march

        Italy has one of the highest numbers of annual road traffic deaths in western Europe, at 55 deaths per million inhabitants in 2017, according to EU statistics. This was more than Spain, with 39.3, and far worse than northern European countries like Norway (20) and the UK (27.1).Oct 1, 2019

        https://ourworldindata.org/coronavirus-data?fbclid=IwAR2Lxuv-zP8rKfVYjVQOeuLQkOtymmiSS27QEESMwqmL0iMBZyupwZrdnA8

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    • In reply to Bob Atkinson
      April 1, 2020 at 1:54 pm

      My comment was intended to introduce some reality into this discussion. While on the individual level every death is a tragedy, there’s a choice frequently exercised in the provision of health care. This choice is due to the limited resources. In plain terms it means that there’s a point when “saving a life” is no longer viable, as cruel as it sounds. Of course it would be suicidal for any politician to say publicly in the situation we find ourselves in that deaths are “unavoidable”. Particularly for a politician who’s been projecting an image of caring and kindness. Yet, we shouldn’t forget that we, humans, are all mortal beings…

      What strikes me most in the current crisis is the total ignorance of the basic concepts of risk management. The existence of a hazard in form of coronavirus has been known for several months. At first, its potential to cause harm to the NZ society was completely ignored; it was the Chinese problem, which simply wasn’t going to affects us at all. In fact, the representatives of NZ universities were very unhappy when travelers from China were banned from entering NZ. Later, and as recently as mid-March, the risks to the NZ society were still beng officially described as “very, very low”.

      Let’s look a bit closer at the risk management apsect. Risk does not exist in a physical sense, it is a concept, which depends on many different factors. It can be expressed as a product of the magnitude of harm that may arise from an existing or potential hazard and the likelihood of such harm occurring. A very simple concept really…

      We manage a risk either by eliminating or isolating a hazard from which it arises or by reducing our exposure to it. In this particular case we had a very real opportunity to significantly reduce the intensity of the hazard followed by its isolation. By ignoring its significance we have chosen not to do so. Instead, when the intensity of the hazard started growing we decided, virtually overnight, to reduce our exposure to this hazard to zero by confining our whole society and in process of doing so putting our economy into hibernation for an unknown period. Yet we barely addressed the hazard itself, which not only still exists, it keeps growing. We have also depleted almost the entire country’s resources, resources which are not infinite. So, what did we base these decisions on? A crude back-of-an-envelope statistical model? A cost-benefit analysis? An analysis of the actions taken by other countries? Or just a simple old fashioned panic? The normal parliamentary process appears to have also been bypassed. WHY? Particularly, considering the fact that there’s sufficient time in recent period to consider the reform to abortion laws and other parliamentary undertakings.

      Liked by 1 person

  2. As I said on Twitter this morning, while they evoke Mickey Savage they are also looking like shades of Muldoon. From this blog it now looks like they’ve taken the worst of both.

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  3. Haha. Have you seen the new issuance schedule? It may be closer than you think. Essentially all of the boost to the economy from a massive QE leading to lower bond yields and foreign selling of NZ assets has now been offset.

    This Government has shredded our civil rights – rights that were won against autocratic governments after everyone was bathed in blood – that stretch back 800 years. They’ve destroyed the sanctity of property rights and contracts; effectively torn up hundreds of years of contract law. They’ve decimated our economy and our fiscal accounts… for what?

    Where does it end Cindy?

    Gulag for anyone who disagrees – at present the Facebook fascists are out in force – or will we see organ harvesting too?

    I’m not gonna stick around to find out… this isn’t Cuba where you can sail 90 miles to freedom if the country turns fascist (which it is, and fast).

    All government decisions involve trade-offs. Here, no discussion or even though given to the costs of what they’re doing. Like blind moles …

    Liked by 2 people

      • Yes we should be clear. Jacinda Ardern is a dictatorial fascist communist and we know live in a Police State.

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      • Yes, that comment can be taken by the police as internet bullying and hate speech with a jail sentence. My IP address is likely being tracked by our intelligence agency.

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      • What I want to see are the statistics for a normal flu season last year same time. How many infected. How many in hospital and how many deaths. I know we had 500 deaths last year with the ordinary flu. At a Statistical death rate of 0.1% then there were 500,000 infections. So far this Covid19 does not spread that fast or that easily looks mild in comparative.

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      • Come on Bob, that is hardly a derogatory name just a common abbreviation, I’ve heard it used by her supporters as well.
        We’ve had Piggy (Muldoon) and Spud (Bolger) etc. without any one getting all precious about it.
        I think I’ll start using it myself.

        Liked by 1 person

      • No Cindy is not derogatory unlike the easy way some left wingers use the term ‘racist’. It is in context mildly rude but my main objection is it is dumb. You and I read this blog to both learn and to persuade; would using this term for our prime minister help persuade anyone who has made the current policy to change their mind?

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  4. In a time of crisis, you see people’s true colours. In New Zealand, our government are clearly fascists.

    The State rules, no one can criticise and property can be held, but at the discretion of the State. Very definition of fascism..

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    • Very interesting that the populations of Italy, Germany and other European countries (who know fascism more intimately than most), are not out on the streets, or all over the interest claiming their governments are being fascist in their actions at the moment.

      Why do you think that is, Belarus?

      Liked by 2 people

      • “So all these countries all have only 1 death like NZ?”

        My prediction is that if the government’s extraordinary but necessary methods are successful, we’ll be deluged with “see it wasn’t that bad, the government over-reacted” commentary.

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      • I have family in Belgium and Netherlands and I’ve spoken to them, to a co-worker in Germany and to friends in London.

        The curfew we are under, with not so veiled threats from a Police Commissioner who clearly loves his job, the threat of martial law and the suspension of our civil rights is all much stronger than what’s occurring in those countries. All of them expressed amazement when I explained what’s taken place here.

        BTW I’ve also lived there. I know Europe pretty well….

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  5. The thing about this lock down, Michael, is that a good number, perhaps even a majority, of our essential workers are minimum wage/low wage employees. The in-home care personnel; the stockers and cashiers at supermarkets; the warehousing and essential goods manufacturers; the agricultural labourers; the cleaners of essential facilities and businesses; the refuse collectors … and there are likely some I’ve missed out on.

    To all those people, if they just got a pay rise due to this minimum wage increase, wonderful.

    One of the things Chris Trotter said about that fact is that we now realise, “there are no s**t jobs, just s**t wages”.

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    • I’m sure no one begrudges supermarket workers their temporary wage increase during the crisis. As noted in the post, the bigger issue is beyond the crisis, when insiders (those with jobs) will be advantaged over outsiders.

      And as of course no one envisaged an econ collapse when they committed to steady large min wage increases.

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      • Nice you appreciate the supermarket workers.

        Can we now move onto the in-home care personnel. Do you begrudge them their minimum wage increase?

        Same goes for all those other workers that I mentioned above, who head out daily from their own bubbles to serve the wider community. It’s not just them, but their families, that end up at a higher risk of exposure.

        Do you begrudge them and their families this pay increase?

        Liked by 1 person

      • My point is the distinction between the crisis and normal times. For workers assuming serious exposures at present, temp wage increases seem quite appropriate, whether or not people are min wage workers. Of course lots of min wage people are no “essential” at all.

        The challenges of getting young/marginal people into employment after the crisis passes remain. Higher cost of labour won’t help there.

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      • I don’t worry as much as you do about ‘after the crisis passes’. Because, I think we are learning as a society that the economic orthodoxy we have practiced it in the past 30-40 years, is no longer relevant. And we are learning how we just don’t need so much “stuff” and that life can be good without a lot that we used to think as ‘needed’.

        I think we will emerge from this with an understanding that we need to address the widening inequality that has arisen in our current practices.

        Part of that will see far wider adoption of living wages, as opposed to minimum wages.

        I see this virus might take the world into a new zeitgeist, with far reaching progressive thinking and action, much like the Enlightenment era;

        https://www.history.com/topics/british-history/enlightenment

        I suspect, we will return to ethics (as opposed to economics) underpinning all our decision-making.

        Liked by 1 person

      • Katherine, you are mirroring the same silliness that Grant Robertson was this morning with the Select Committee questions. These are emergency lockdown measures that are disproportionate to the risks demonstrated so far. Pay rises lumped onto all businesses is a stupid response in a period of crises. The government should set aside a fund to cover essential workers and call that hazard pay.

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      • Katherine, the estimate is 200,000 jobless due to this ridiculous level 4 Alert lockdown. You can ask them how they live on their $585 a week if they get it or even less if they have to go to Winz for their $350 unemployment benefit.

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      • Katherine you suspect, we will return to ethics (as opposed to economics) underpinning all our decision-making! As the Aussies say “You are dreaming”. But stand for parliament and you would get my vote.

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      • Fascinating to peer into the post virus future Katherine though it’s sometimes difficult to untangle what we’d like to see from what we’re likely to see. The anti-human greens are delighted with the prospect of the demise of humanity itself, for example.
        Anyway, I’ll give it a go.
        Increased independence/nationalism and a rejection of wholesale globalism seem certain. A reassessment of our “cosy” relationship with China and the demise of the European integration project perhaps. We have, for obvious evolutionary reasons, an instinctive awareness of the danger of strangers, so expect xenophobic feelings to increase, an aversion to mass transport and crowds. Vigilantes blocking the highways a manifestation of us versus them?
        There will be a lot of singles right now questioning the choices they’ve made and reassessing the value of marriage and family as a consequence. Expect a renewed appreciation of family, community, culture heritage and the nation; classic Scrutonian conservatism in other words.
        A rejection of the ghastly narcissistic individualism we’ve seen develop but, somewhat counter-intuitively (and hopefully), a rise of the enlightenment ideal of genuine individuality and diversity of thought.
        Our culture, absent a religious substrate, is thrashing around trying to create values and morality out of nothing but feelings (and not always positive ones) so expect a reexamination of the fundamental human condition; life, death, meaning and God; a replacement for the god of materialism as you suggested?
        Not sure why you expect inequality to decline; would it be driven by economic factors, resentment or compassion?
        Cheers,
        David.

        Liked by 2 people

    • Hi David. Thanks for your thoughts. I’m guessing we are already witnessing a change in gini coefficient (wealth distribution) as much of the world’s stores of capital are being eroded by the stock market rout. I don’t think QE has any chance of maintaining the status quo of wealth distribution.

      We presently refer to these events as recessions/depressions (i.e., in economic terms) but if we re-frame what is happening in ethical terms, I think we are seeing a Great Leveling. In the US, for example, the private health care system is out the window – everyone, whether they have insurance or not, is being seen/treated by their health system. So that’s a kind of socioeconomic leveling – and I think we’ll see lots more of it.

      Barring some kind of world war, sovereign debts will likely be excused in future and a new system of int’l trade/finance will emerge. Private vs public sectors are already being blurred. An interesting thought from a Brazilian author (linked below) notes that on a fundamental basis this is not a public health crisis, nor an economic crisis but instead a crisis of ethics. We are all contemplating/re-examining our morals – just think how the teddy bear hunt has gone viral – everyone is starting to consider others, and to display empathy.

      I suspect paradigm change is assured – and yes, for my grandchildren’s sake I hope that change becomes one of compassionate re-building (a Great Leveling), as opposed to militaristic destruction.

      https://pagina22.com.br/2020/03/27/um-manifesto-coalizao-pela-vida/

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  6. I have recently returned from North Korea. Some peoples vision for the future.

    Things I leant
    – military service is not compulsory. Its just that the girls admire the soldiers, so everyone joins up to get the girls
    -information is freely available from the outside world. there are more than 1 million foreign books in the National library. Going past the checkout counter there just happened to be two New Zealand books shown to me. the most recent was New Zealand exports 1978-79 and the other a technical ag book form the 50s.

    – people dont appear to have much ‘stuff’ ‘ but I didnt hear any complaints

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  7. Ian, that has to be one of the silliest comments I have read in your name (and there have been more than a few over the years). You say that people in North Korea “do not have much stuff but I didnt hear any complaints”. Given the consequences of complaining in that country, I would be amazed if they did speak out with concerns or complaints. Moreover, you would only have been shown the more ‘positive’ parts of the country; not the things they do not let visitors see, such as the prison camps, the poverty in the villages, etc.

    But why even raise North Korea in this post??? Are you suggesting that NZ should consider itself lucky by that reference point? Try to keep your comments on point!

    Michael, I agree with many of your points. I share the view that the increase in benefit rates was unnecessary, given that their standard of living is not presumably made materially worse by this situation. Likewise, raising the minimum wage at this time was ill considered and makes it all the harder for some to get or maintain employment now and in the fragile and staggered recovery that lies ahead. Some of the measures taken, such as income support for those adversely impacted and government guarantees to support access to finance, are certainly appropriate, albeit less generous than in many countries. But what is needed soon is a comprehensive package of macro and micro policies to help transition the economy from where it is now to at least a baseline level of operation pending the longer term resumption of exports of goods and services (which will be at least 1 to 2 years away). The package will doubtless need to encompass targeted income support at a more generous level for deeply impacted businesses and employees, a longer postponement of the increase in capital requirements for banks, possibly an extension of the government guarantee scheme to support corporate funding, etc. We also need to see transparency of indicators to be used as triggers for progressive easing from alert level 4 back to 3, then to 2 and 1. Regional variations need to be factored in based on risk factors. Border testing and quarantining needs to be part of the transition for a period. Maybe a joint trans-Tasman arrangement is needed to at least free up movement between NZ and Aussie once infection rates are low.

    Overall, we are not seeing enough analysis of economic and other policy options from government, and virtually no cost benefit assessment. That needs to be substantially improved. At some point, a call will need to be made as to what level of infection and mortality society is willing to tolerate in exchange for getting back to as close to normal life and economic activity as possible. I have seen virtually nothing of that from ministers.

    Geof

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    • Given that last year there were 500 deaths from 500;000 infections due to normal flu I would expect a threshold of at least 500 deaths before an emergency level 4 alert lockdown should even be considered. A more fact driven trigger rather than the nonsense projections being issued by our Health department.

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    • Thanks Geof. I largely agree, altho of course on any tradeoffs in your final para, it is only the marginal effects that are relevant to the choice. If we reverted to the govt’s previous strategy – mitigation – there would still be enormous economic losses, both from the choices of other countries, and the actions and inactions of individuals, in NZ and abroad. It would be a real challenge to get a sense of the truly marginal effects of the current partial NZ lockdown – which doesn’t mean it isn’t worth trying to think thru, and put broad magnitudes on the key variables in the exercise.

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  8. Michael,
    I tuned in here after a couple of week’s absence.
    Unfortunately you do attract the Red Necks in all their glorious versions.
    They seem to believe their mantra and if they do repeat them long and often enough someone will listen.
    I am sure Herr Drumpf would find a place for them in USA if they tried.

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    • Yes. To be clear I have no strong view on the merits or otherwise of the govt’s latest policy emphasis re the virus. Only time will tell. But it is too often forgotten that whatever the nz govt does there will be a very deep recession here.

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  9. A comment on the minimum wage increase.
    Firstly every cent gets spent over a few days after arriving in the bank so compare that to the CEO who spends a very small portion immediately and wastes much of the remainder on unnecessary upgrades to house car or overseas trip.
    Secondly any increase at the lowest level gets into the general pricing (which the RBNZ should welcome as it as failed miserably to get to its upward inflation target). Employers complain because they fail to recognize that a cost rise to them affects their direct competitors in a similar way.
    The general public are price takers at least for small amounts so most price rises attract little resistance.
    ’nuff said.

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  10. Is something missing here ?

    For an employer who maintains a minimum wage employee in employment … An increase of $1.20 per hour for an employee working 40 hours per week on the minimum wage will cost the employer $48 extra per week. An employee working 35 hour week will cost the employer $42 extra per week. … The employer will receive the Government lump sum wage subsidy of $550 per week for 12 weeks or $7000

    If the employer terminates the employee at the end of 12 weeks the extra $42-$48 ceases and the employer is better off by $6500

    If the employer retains the employee it will cost $2100 for a year
    But the employer has received $7000. So the employer is to the good for 2½ years
    At the end of 2½ years the employer can terminate the employee and still not be behind

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      • I think you can assume a large number of businesses will meet the 30% reduction criteria. My comment refers to the employees retained

        from David Chaston in today’s PM summary
        HOW TO SPEND $4.3 BLN VERY FAST
        The Government has received a total of about 387,000 applications for wage subsidies, rising almost +5% in one day. They have paid out $4.28 billion so far according to sources at MSD. And given that there are 2.65 million people employed in our labour force, so far claims have been made on 15% of them. And that averages a payment of $11,000 per job claimed. It is going to get very, very expensive.

        $4.3 billion is nearly half the budget in dollar terms – already

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  11. “if the government believes high-speed rail from Auckland to Tauranga or Hamilton, or lots more Island Bay cycleways, are the answers, they will simply be on the path to making us poorer”.
    It’s difficult to imagine any enthusiasm for the use of mass/public transport for a long time to come.
    One of the reasons for the catastrophic rise in virus cases in New York was their subway and their mayor’s foolish encouragement to use it until quite recently.
    I’m sure they will find a myriad of other ways to make us poorer, the level of shear incompetence sufficient in itself.

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  12. Katherine, I not only voted for Cindy but I also contributed a significant sum to her campaign. I certainly wouldn’t class myself as anti-government.

    But their behaviour over the past few weeks has absolutely been fascist.

    Fascism (/ˈfæʃɪzəm/) is a form of far-right, authoritarian ultranationalism characterized by dictatorial power, forcible suppression of opposition, and strong regimentation of society

    Just because they are the NZ Labour Party doesn’t mean they can’t be fascist. After all, European fascists all claimed some sort of socialist roots. This government has allowed police to enter my home, I can be arrested and detained without charge, I can be tried without a trial by jury. And on top, I’d I complain, I get shouted down like you’ve just done.

    Your comments about me, slamming me down, just prove my point. At this juncture absolutely no debate or criticism is allowed in this country.

    Well, If that’s the society New Zealanders want, I’m not gonna stay a part of it…

    Liked by 1 person

    • Belarus, I hardly slammed you down. I pointed out an observation (i.e., the non-resistance and general public support for the quarantine and lock down measures in those currently most affected countries. And then asked you a question, which you responded to. All good there – that’s what blogs are about.

      Our government have not imposed a curfew to my knowledge (but happy if you can link me to what the curfew times are, if there is one) nor are we subject to martial law (whatever your description of that is) as the term does not exist in our CDEM Act.

      Civil rights are often curtailed in a Civil Defence Emergency. You have every right to bemoan that and it does sound as if you have other choices should you feel the CDEM Act in New Zealand gives elected and non-elected officials unreasonable powers. You can read the Act here;

      http://www.legislation.govt.nz/act/public/2002/0033/latest/DLM149789.html?src=qs

      It is routinely amended (often based on reviews post-CD emergencies), you can see a list of those various amendments and their timings, here;

      http://www.legislation.govt.nz/act/public/2002/0033/latest/DLM5519113.html

      Liked by 1 person

      • Katherine, 1 death from 900 infections still does not constitute an Emergency Level 4 lockdown. It is stupidity at the highest level. It is like saying there has been 1 death and 900 accidents from driving cars so we must ban all cars. Jacinda Ardern again has made an irrational shoot from hip, trigger happy decision without facts.

        Our health professionals and Jacinda are acting on panic from watching Youtube videos and making nonsense projections of death rates unsubstantiated.

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      • It’s very understandable to initially think ‘but we’re different’. I get that. But we’re as globalised as the rest of the world.

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      • Katherine, your logic and argument belongs in the rubbish bin. There is a curfew on most businesses from operating. That is a curfew policed by armed police if you have not noticed?

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      • GGS: if you are playing around with stats then the average death is a month after infection; NZ’s first reported infection was Feb 27th. So compare the death with the number of probable cases when infected and it may be 1 in 10 not your 1 in 900.
        Mortality rate is higher the older you are but so far NZ has an unusually young set of victims, as cases become community based rather than overseas arrivals that age profile is likely to change and more serious cases will eventuate.
        If NZ keeps its fatality rate to 1 then I will be thanking our govt and of course our loyal opposition for the policies they put in place. Of course we have had the advantage of seeing what is happening elsewhere so with luck we may escape the troubles they have in Spain.

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      • Bob, 80% of infected people do not get more than a mild effect and will not be tested So your 1 in 10 is already wrong dramatically wrong. Lets stick to facts rather than watch iranian Youtube.

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  13. Considering political “buy in” from citizens for a lock down, if people start to think the governments actions are politically inspired, which things like minimum wage and benefit increases truly are, then there is a risk cynicism about those actions ends up extending to the whole package, which may be very bad for us during a Pandemic. The government is running on trust here – intelligent people realise they are guessing somewhat – the government should respect that trust but I feel they are not.

    On the question of infrastructure spending, I would have thought this would be a good idea providing it is on health care infrastructure. My impression NZ is adequately staffed with good health care professionals, but our facilities are stretched. In the end this has probably pushed us into a level four lockdown much sooner because the modelling reflects the lack of ICU facilities. Spending $1 on hospital space could have saved us $10 on lock down costs (just as example).

    Even if the pandemic passes we will be left with an aging population affected by flu and future Coronavirus no doubt.

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    • Yes, largely agree. Can’t, however, see any credible health infrastructure spend being on the scale ministers seem to be talking of – or if it was it might be white elephants like huge new hospitals in fairly peripheral places, when it might often be better to concentrate in the biggest, say, 6 cities, and provide strong support with helicopter and physical/financial support to families of those removed to the tertiary hospitals for treatment.

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  14. Covid 19 coronavirus: No quarantine for 3600 people returning to NZ from overseas

    https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12321689

    “It’s a high-trust environment. The vast majority of people understand their role and comply,” Bloomfield told the Epidemic Response Committee yesterday.

    ABSOLUTELY ABSURD – you don’t lock down an economy & then run on “trust”.

    Everyone coming across the border including pilots & aircrew need to go into quarantine or fully monitored self isolation for 14 days with testing.

    Its pointless if “the majority” comply. Everyone needs to.

    Director General of Health Ashley Bloomfield needs to be replaced.

    Liked by 2 people

  15. Always a pleasure to read your blog Michael. Also, it is a pleasure to read most of the comments. Finally, I feel I am not alone. This Covid 19 issue is just a reason found by the government to get that cyclical financial crisis. It was about time, it usually happens every 10 years. Lock-down could have been avoided and, even if we have it, it doesn’t help much. And that is because the vaccine will be ready in January 2021 the earliest. So 4 weeks or 4 weeks + 1 or 4 weeks + 2 doesn’t help at all. Unfortunately, eventually, the medical system is going to be under stress sooner or later no matter what they do.

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  16. Disappointed that tailrisk has only satire to offer…

    Disappointed too that the word most absent from all this talk is “moratorium”

    We should have passed a law stopping the calendar at 26 March or whenever it was until we are ready to resume. Summer time on steroids. Food parcels and subsistence in the meantime, but a veeery long day legally.

    Apologies to Gregory

    Like

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