Finance Minister Grant Robertson fronted up to the Covid-19 Select Committee and began answering the two big questions about the virus and its impact.
When will the lockdown end and how will we get out of it?
And what will the country look like when all this over, maybe as far away as 18 months?
His appearance was against a background of another day of only moderate growth in covid-19 cases; more reports of confusion on the medical frontlines and two major companies cutting their workers’ wages.
There were 61 new cases yesterday; down from a peak of 85 new cases last Friday.
But Prime Minister Jacinda Ardern warned that the slow down in the growth rate was no cause for complacency.
“While on the face of it, that may seem a heartening number relative to some of the other figures that we’ve had, I want to emphasize again that it is still too early to assess if our measures are successfully slowing transmission because covid- 19 takes a while to incubate,” she said yesterday.
“We could still see increases in our numbers in the days to come off the back of transmission in the community prior to the lockdown.”
The big question now is whether the lockdown will end on April 22, as planned.
At the meeting of the Covid-19 Response Select Committee yesterday, ACT MOP, David Seymour defined the dilemma facing the Government.
“If we get out too early, that could be deadly,” he said.
“But if we leave it too late, it’s going to be economically deadly.”
It has already seriously damaged the economy. Treasury is working on new forecasts this week.
“What we will know is that coronavirus is going to lead to a very severe and negative contraction in the economy,” Treasury Secretary, Caralee McLiesh told the Committee.
“It represents an enormous supply and demand shock and is flowing through the economy through pretty much all our channels.
“Other forecasters are saying that we also are looking at or anticipating reductions in GDP of between 10 and 17 per cent in the June quarter.
“And that’s broadly within the ballpark of what we are looking at as we finalize our forecast this week.”
What McLiesh didn’t say is that those “other forecasters” are the bank economists who Treasury has been briefing on a weekly basis. In essence, the bank forecasts are proxies on Treasury’s forecasts.
And she suggested that Treasury was now looking at unemployment in excess of ten per cent.
“We are expecting to see quite a very significant increase in unemployment,” she said.
“Forecasts that are available on the market now range between five per cent per cent, a little over five per cent to well into the double digits.
“Again, that’s broadly in line with our thinking.”
McLiesh said that Treasury was seeking to understand the reduction in output that was associated with the different levels of containment measures.
“The worst-case scenario depends on how long those sorts of containment measures are in place for,” she said.
But there was a grim warning from Australia yesterday on just how long the battle against covid-19 might take.
Australia’s Deputy Medical officer of Health, Paul Kelly, said it would not be possible to consider the virus eliminated until a vaccine was available. That could be as long as 18 months.
Robertson said the All of Government committee was now working on what to do when the lockdown is scheduled to end.
“Clearly we need the lockdown down to be in place for long enough for us to be able to get on top of the virus,’ he said.
“We need to balance that, obviously, against other considerations.
“But the health driver is the most important driver, and for the long term prosperity of New Zealand, we need to get on top of the virus.
“The best economic response remains the strong public health response.
“But clearly, we will consider what the economic consequences of that are.”
Robertson implied that the exit from Level Four would be to Level Three and then continuing on down through the levels.
“So, yes, we’ll go out of Level Four hopefully after four weeks,” he said.
“But Level Three also requires significant restrictions on the economy.
“Level Two requires restrictions on the economy.
“So while I appreciate the focus on the intense impact of Level Four, the scenarios we have to build about impacts on the economy, actually have to look at the management of the virus through the other phases.
“So not an easy piece of work, but it is definitely the work that’s underway.”
Also speaking to the Committee, the economist Shamubeel Eaqub, who warned that any extension of the lockdown would require even more subsidies for business.
“If the lockdown is going to be extended for whatever reason, we know that further support will be required,” he said.
“And we know bridging finance on its own, for example, would not be enough.
“So we need to be quite careful about any extension of the lockdown, having very clear criteria, but also understand the economic consequences are non-linear and that we are going to see many more businesses fail the longer this lockdown goes unless there are many more generous provisions.”
There were clear signs yesterday of the pressure the lockdown is palcing on business.
Fletchers – who POLITIK can now identify as the company which considered laying off its workforce after Friday — is now going to ask them for a 70 per cent wage cut and Mediaworks the radio and TV broadcaster is imposing a 15 per cent wage cut.
But if the economic consequences of the battle against the virus were all too obvious; there seemed to be ongoing confusion on the medical frontlines.
The principle issue is the lack of Personal Protection Equipment which is reducing the ability of GPs to conduct consultations.
One Wellington practice which usually sees over 100 patients a week has been issued with 13 gowns and told it could only get those replaced once a week.
Throughput at surgeries is now down so much that the Royal College of GPs yesterday issued a statement saying there were reports that some GPs at larger practices were being laid off. Wellington’s After Hours Clinic has so few patients it is to close at 8.00 p.m. and patients advised to go to Wellington Hospital Emergency Department.
At Treasury, while they are busy revising their current forecasts and working on what Robertson says will be a very different Budget, officials have also begun on work on what New Zealand might look like once the coronavirus pandemic is over.
There has also been some talk within the Beehive about this as well.
“With a profound disruption like this, we do have to think about our macroeconomic settings and approach,” Robertson said.
“We’ve been well-served in recent times by consistent fiscal policy and how we export to the world.
“But we do need now to look at what this global disruption means for the long term.”
He said he was asking three questions.
“ What should we make and do here in New Zealand to ensure our sustainability?
“What institutions do we need to support our economy?
“What is the role of the state?
“How do we trade with the rest of the world in this new environment?
“And how will the financial system both here and globally, cope?”
Robertson said the work was underway. The urgency that appears to be attached to it might be because the logical outcome would be a vision for the future, which could form the basis of an election campaign.
Former Obama White House Chief of Staff and Chicago Mayor, Rahm Emanuel famously said “You never want a serious crisis to go to waste. And what I mean by that is an opportunity to do things that you think you could not do before.”
Robertson is an avid student of political history; he must have read Emanuel’s quote.
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