There have been a few stories in recent days about the potential implications for economic activity in the rest of the country of the temporary border between Auckland and the rest of the country. The articles seem to have focused on transition across the border, which is strange since (at least as I understand it) freight itself is largely unrestricted. The issues seem to be more about what activities (including production activities) are able to be undertaken in Auckland while it is still under the government’s Level 4 restrictions (which could be weeks yet). And, of course, the point of Level 4 is that not very much – at least that can’t be done sitting at a computer or producing/distributing food, power, water etc – is supposed to be able to be done. For good or ill (perhaps for ill last year, perhaps for good this year – given the intensified risks with Delta) New Zealand has taken a much more restrictive approach than most countries, and even than Australian states. And if a lot of New Zealand manufacturing is in Auckland that is going to have ramifications for what economic activity can be sustained in the rest of the country in Level 3 (or Level 2).
A reasonable guess – but it is a stab in the dark, since SNZ had real measurement challenges – is that the Level 4 lockdown last year coincided with a 25 per cent reduction in GDP while it lasted, and that probably remains a sensible (but perhaps lower bound) guess for the current situation. See this year’s Treasury assumptions here. For level 3, Treasury estimates that the economy as a whole would experience a reduction of GDP of 10-15 per cent for the duration of those restrictions, but there is less data to go on. Whatever the number, it is still large, perhaps $800 million per week (in GDP losses alone) if the whole country were in Level 3.
But, of course, it isn’t. And in the last year for which we have data, Auckland accounted for 38 per cent of national GDP. In a particular production process, the unavailability of even one component that happened to be manufactured in Auckland but used nationwide could quite quickly – depending on inventory levels held outside Auckland – begin to impair production in the rest of the country that could otherwise quite lawfully occur.
But it seems fairly unavoidable, at least for as long as elimination remains the goal (as no doubt it should for some months yet). The Auckland outbreak has been a serious one, has grown more quickly than those in either Victoria or New South Wales, and existing restrictions have not yet squashed it. It certainly can’t be time for freeing up more activities in Auckland, no matter the possible GDP gains there or elsewhere in the country.
But the other thing that has struck me in the last day or two is the stories about people moving across the border. Of course, freight means people (whether train drivers, truck drivers, pilots), but there are other people too. There have been those extraordinary stories of students flying out of Auckland and encountering no checks either when they purchased the ticket or when they boarded. Essential workers in Auckland who live outside the border have permission to come and go for work. (A few) politicians have been moving. And even hospital patients have been being transferred to other cities to relieve pressure on Auckland hospitals. Reports suggest some of the (few) planes out of Auckland are quite full.
And it appears that not one of those people is subject to frequent testing or any isolation restrictions. I heard on Morning Report that Ashley Bloomfield had mused aloud yesterday that some testing might be a good idea – prompting spluttering from the Managing Director of Mainfreight – to which one could only think “well, indeed, and if only there were senior officials and ministers able to bring it about, and not actively blocking it”. Eric Crampton had a nice piece on his blog yesterday highlighting the extraordinary delays of rolling out government saliva testing, and the prohibitions on the import and use (by firms, by anyone) of the rapid self-tests, which produce results in 15 minutes and could be used before each shift and/or border crossing.
Rapid antigen tests give results in about fifteen minutes. They are not likely to catch cases with low viral loads but are decent at high viral loads – the people who would wind up being infectious. Having workers run a self-test before starting shifts would add an additional layer of protection. But no rapid antigen test has been authorised for use in New Zealand. It is unclear whether MedSafe has even considered any – I have a request in with them for more information.
This sort of thing is being done in much of the rest of the world, but not here. That is entirely on the government and their officials.
It all seems a part of the sort of issue I highlighted last week of not taking the risks sufficiently seriously (seemingly a bit indifferent to the significant economic losses, and draconian incursions of normal life/freedom, that lockdowns bring).
A matter of weeks ago we had no community Covid in New Zealand but they had community outbreaks in Australia (and Fiji and other places). The focus here was, supposedly, on keeping it out. Arrivals from some places were largely barred altogether, quarantine-free travel from Australia was suspended (so that any future arrivals had to go through MIQ), there was even the charade of a pre-departure testing requirement (a charade because (a) it didn’t apply to NSW, (b) it still allowed up to three days between testing and departure for someone to become infected, and (c) for quite a while the government wasn’t even checking that most arrivals had had tests. And fairly tight protocols were in place around crew on cargo ships docking at our ports.
Now we have a significant community outbreak in Auckland (in per capita terms still worse than that in Victoria), and none of those sorts of protections on the internal borders. The government has restricted the number of people who can cross – essential to the regime of course – but does nothing systematic or rigorous to reduce to an absolute minimum the risks associated with those who do come out of Auckland (in some cases, coming and going every day). It seems unserious and not commensurate with the magnitude of the risks (remember the costs of renewed Level 4 lockdowns). Sure there are Level 4 restrictions in place in Auckland, governing everyone while there, but….there is still community transmission occurring. And once people are out of Auckland the restrictions are much less onerous, especially if much of the rest of the country was to shift to Level 2.
My suspicion is that this is another of those things/risks that just wasn’t properly planned for – despite the government having had months of notice. If it were otherwise, how could they possibly be so cavalier about the risks of cross- (internal) border transmission?
There don’t seem to be public figures on how many people are crossing the border each day*, or how far they are ranging, but it seems certain that the numbers are more than those crossing the external border each day (averaging just over 300 a day even over the last week), and we know that MIQ isn’t foolproof (how Delta got here in the first place), and is potentially becoming less secure than it was, with the vaccination/Delta combination. As yesterday’s events showed, isolation/quarantine hotels aren’t either. And there are no testing/isolation requirements on any of these people moving each day into Covid-free rest of New Zealand.
[*UPDATE: A Stuff story says 2000 trucks a day across the southern border, plus however many – presumably a much smaller number – across the northern border from today.
FURTHER UPDATE: A Herald story states that “of the first 3059 vehicles Police stopped at five checkpoints [on the southern border] just 114 were turned away]
It seems extraordinarily negligent, and inconsistent with the stated goal of elimination for the time being, at least while keeping to an absolute minimum the risk of new draconian lockdowns in the rest of the country. We have managed the risks around goods flow through the ports over the last 18 months, but barely even seem to be trying with internal movement now – when the threat (from Delta) is much greater. It all has the feel of a race between squashing the outbreak in Auckland and the likelihood that on current policies and practices it will get through again to the rest of the country. I’m sure we all cheer for and hope for the former, but it seems quite reckless of the government simply to gamble rather than act.
Which brings me back to Eric Crampton, this time from his Newsroom column quoted in the post
The government could, today, order a couple million rapid antigen tests. They are broadly available. It could distribute those test kits to every essential workplace in Auckland and require that every essential worker be tested every day before starting work.
It could be a condition of a Level 4 modified to suit Delta.
Within about fifteen minutes, each worker’s result would be available. Infectious workers could be sent to government testing stations for confirmation. And workplace transmission would be sharply reduced.
But not just essential workers in Auckland, but everyone crossing the internal border out of Auckland. If they won’t do something like that it is hard to take their words seriously. They are again exposing us to new lockdowns, and recall that the best estimate of a Level 4 lockdown is that lost GDP alone (never recovered) is $1600 million a week, and all that disruption to the rituals of life, including in its toughest and darkest times.
croaking cassandra 
I have a query in with Medsafe asking what it would take to get any of the antigen tests approved. I think it’s $8k to get one considered. I might do a whip-round if it comes to it to force the issue.
I strongly suspect that nobody has sought approval for any of them, on an expectation that the government would forbid their use, because the government would not want them here. The government, for non-crazy reasons, wants all cases tested through their swab regime so they can monitor everything. That isn’t nuts when running elimination and wanting to contact trace after every positive test.
Allowing it at essential workplaces where better tests are logistically impossible (you’re just not going to get proper testing at each of thousands of small essential businesses running under L3/4) would help. The tests are currently illegal. More than a little frustrating.
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Perhaps you should approach Don Braid – since it is the efficient solution to the delays etc he was worrying about this morning.
On restricting them, there is quite a tradeoff: make the rapid tests widely available and many more people will test, or keep the status quo and a lot of people won’t bother or are positively put off the idea of a painful test. I know you are proposing a middle ground.
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But it seems fairly unavoidable, at least for as long as elimination remains the goal (as no doubt it should for some months yet). I disagree with this statement Mike as NZ as a cuntry under ardern is the only one peersisting with elimination aas a strategy and like the rest of their agenda will be an abject failure.
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I guess my view is very context specific. I’m all in favour of scrapping elimination when everyone has been offered 2 doses of the vaccine, a lot of effort has gone into encouraging everyone to take it, and when orders are in place for booster shots next year. That should be a matter of months away. Whatever one thinks of the elimination approach over the last 18mths it would seem a bit reckless to abandon it right now. A Covid wave is probably inevitable at some point, but it looks as if we’d be much better placed to absorb it early next year. As it is not much more than 65% of our elderly – those most exposed – are fully vaccinated,
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Are there not two types of tests? One of any of several types of rapid tests (saliva etc) to see if you have a viral load now (thus, useful for employers, as you/Michael say) and another antigen test to see if you’ve had Covid previously. Both I think banned?
With the string of papers now being published looking at prior Covid, even if mild/asymptomatic (seemingly counterintuitively, perhaps especially), as more effective than vaccines, if those findings hold into peer-review and more papers, the banning of those tests could become quite an explosive issue. Likely weaponized by anti-vaxxers and political narrative controllers alike, and highly polarizing.
For those of us interested in neither narrative, only fact/truth (to the extent such a concept even exists), having those tests available could be tremendously valuable, and the Uni research already underway even more valuable, although if public ‘debate’ is highjacked or poisoned by either of those groups, it may be too late for informed decision making for most people.
But at least the science will out eventually, so we’ll know in 2022 what we should have done in 2021, with 2021 knowledge available in 2021, masked only by political class/ mass media/ social media all contributing to obscurantism while blaming each other…
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I suspect the odds are that the rest of the country is more likely to move back into Level 4 than Auckland is to move into Level 3 …
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Probably where I would put my money too (perhaps 55:45 tho).
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Hello, Have you looked at the $90 millon being offered by DIA for the 3Waters Reform proposal? I not not believe the numbers are reliable and many Councils are starting to understand the dangers of the offer Richard Hoadley
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I haven’t dug into this issue at all, altho I listen with respect to the scepticism coming from Castalia economic consultants.
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You may have already read this opinion. R
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The problem with this Government is its ministers lack of real world experience in any field that involves operational and logistical challenges, hence its complete lack of progress on housing, energy supply, transport solutions and now vaccine supply and distribution, medical testing and quarantine. This problem is exacerbated by their ideological aversion to trusting the private sector – the source of almost all operational and logistical knowledge in any economy – and their reliance on a small cadre of senior officials, most of whom lack the same experience. This all results in a delusion that if you think you have the right intentions, the solution will somehow appear – a reality distortion field, if you like. The road to hell, and all that…
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What a great post.
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A dozen comments in a single morning. There must be a reason so many readers have time on the hands.
This site is read by economists and they usually enjoy analysing cost benefits. I’ve read estimates for the cost of the current lockdown although I can’t recall them. What I haven’t seen is an estimate of the cost if that unnamed 58 year old Devonport man had decided to go to his GP a day or two later. Judging by NSW and Victoria Covid-19 might have been out of control by now. My guess is that Devonport man’s simple action has saved NZ billions.
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If his action shortened the lockdown by a week that would have saved about $1.6bn in lost GDP. Of course had he not chosen to go, then most likely one or other of the early cases would have gotten tested within a couple of days.
It remains remarkable that the Davenport man infected no one in the Coramandel weekend.
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Yes, its absolutely absurd that everyone crossing the Auckland border is not tested – i.e. required to have a negative PCR result that is no older than 48 hours.
The government is only looking at it:
https://www.rnz.co.nz/news/national/450657/decision-to-test-essential-workers-crossing-auckland-s-border-described-as-ludicrous
Where I currently reside their is a similar internal border and negative PCR tests are required (results no older than 48 hours), and an elimination strategy is not even in place.
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Great site. I’d be interested in some numbers from an economist – all we get is health “experts” like Hendy and Pinky…
Out of interest, do you know:
1. How much the government and RB stimulus package has been to date with regards to Covid?
2. How big other countries’ Covid stimulus packages were, as a % of GDP?
I saw somewhere and wrote down that in February 2020, Government debt was approximately $60 billion, and it is forecast to reach $190 billion by 2025. If I take this $130 billion as stimulus package, plus I add the another $50 billion or so printed by RB?
So package = circa $180bn? I think NZ GDP maybe 290BN NZD, so I get around 60% of GDP as my back of a fag packet calculation…
Anyway, I’d be interested in any numbers you have.
Everyone says we’ve done the best economically in the world, but I fear that we’ve done the worst…
Thks,
CF1
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And yet an iwi run border control in Kaeo stopped a professional photographer from travelling 20 mins north to do his lawful job.
Maybe we could rent this private army from Hone Harawera to look after the border out of Auckland.
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What do you thing of the sentiments here Michael?
https://niccolo.substack.com/p/the-khyber-pass-interview-murtaza
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Slightly overwrought but yes it did ring a few bells about cities rather nearer home.
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I remember they asked you about Ponzi scheme in North & South. Did you read the paragraphs beneath about the need for a national identity (no matter how imperfect people are)?
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Yes, quite nicely put
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