The Prime Minister Jacinda Ardern with the Director General of Health, Ashley Bloomfield, yesterday.

The Prime Minister and Cabinet now face the big question; do we stay at Level Three or do we go to Level Two.

If we stay at Three will the economic damage vindicate the increasingly combative campaign from the Opposition Leader calling for the Government to save jobs by moving now?

If we do move could that vindicate the fears of health academics who fear a return of the virus?

But besides those hard questions,  there was some good news yesterday.

A series of economic reports out yesterday suggest that Covid-19 is not having as negative effect on the economy as the Treasury has forecast.

Reports from economists at three trading banks challenge the Treasury forecast that unemployment will reach 13.5 per cent — or 531,000 — by the end of the year. Instead, their projections range from 9.4 to 10.5 per cent and thus have unemployment at over 100,000 below Treasury.

And an economic report on activity in central Auckland suggests that the big three sectors there: financial and professional services and Information media and telecommunications are currently running at between 60 and 90 per cent of their capacity.

However, the impact on the economy will still be massive.

Auckland’s Heart of the City commissioned the Strateg.Ease economic consultancy to prepare a report on how Covid-19 might be impacting on the inner city.

It found that $3 billion of the inner city’s $21 billion of GDP could be lost by March 2021.


In Auckland, the most affected sectors would be real estate, food and accommodation, arts and recreation and retail.

The survey projects retail’s share of GDP to drop by 74 per cent and food and accommodation by 85 per cent by March next year.

The problem is those sectors are where there are large numbers of low skilled, lower-paid jobs.

There will be few alternatives for those workers in the inner city.

The Reserve Bank has been looking at much the same detail as the Auckland study and has found similar results on a national scale.

In a “note” three Bank economic analysts have found that the economy has been working at about 81 per cent of its capacity during Level Three.

But like the Auckland study, they tick off accommodation and food services; administrative and support services and arts and recreation as being particularly hard hit with their contribution to GDP reducing by between 70 and 80 per cent under Level Three.

A warning of how this would impact on jobs came yesterday from StatsNZ.

They produced unemployment figures which showed the seasonally adjusted unemployment rate rose to 4.2 per cent in the March 2020 quarter, up from 4.0 per cent in the previous quarter.

Though these figures track the pre-lockdown period, there were some ominous warning signs at the end of March.
“There was a sharp rise in the number of people receiving Jobseeker benefit support at the end of March and start of April, though this is not the same as the official measure of unemployment,” said household statistics senior manager Sean Broughton.

Reacting to the March figure, ASB senior economist, Mike Jones, said the pace of job losses was likely to rise steeply from here.

“We expect the unemployment rate to rise sharply in the second quarter, but the peak (we have 9.4% on the board) will likely come in the third quarter as firms adjust to life without the government wage subsidy,” he said.

“We expect it will take several years before the unemployment rate moves lower on a sustained basis.

“This has clear negative implications for household spending and the housing market.”

National Leader Simon Bridges has been attacking the Government over the potential unemployment figures, demanding that it move out of Level Three now.

“Every day we remain in lockdown, more businesses will collapse, and more people will lose their jobs?” he said in Parliament yesterday.

But at the heart of the decision, the Cabinet will make on Monday based on advice the Director-General of Health Ashley Bloomfield will supply later this week is whether we are on track to eliminate Covid-19 in New Zealand.

And here the advice from health academics may counter the kind of demands Bridges is making.

In a joint post on the Otago University Public health Blog, the “big guns” of the Covid-19 epidemiological debate, Professors Michael Baker, Nick Wilson, Shaun Hendy, David Skegg have set out three conditions they argue New Zealand needs to meet if it is to eliminate Covid-19.

  • The absence of newly diagnosed infections, within the country for 28 days since the onset date of the last known infection);
  • The presence of a high-performing carefully targeted national surveillance system that was testing an average of at least 10,000 a day.
  • Allowing exemptions for cases of infection among incoming travellers detected at the border and held in supervised isolation/quarantine facilities until full recovery.

The professors say it would be prudent to assume that the absence of the virus should be for at least 28 days because that is two times the maximum incubation period, but their proposed daily testing level (10,000) is above the current level of 4,200.

But Bloomfield made it clear to the Covid-19 Epidemic Response Committee yesterday that he regarded an incubation limit of 14 days as appropriate.

The outer limits of when someone who might have been infected starts to display symptoms is 14 days,” he said.

“Most people display symptoms within the first five to six days.

“But there is a long tail, and that’s what we are watching for.

“And that’s why the 14 day period is used right around the world for that period of isolation.”

The debate over the incubation period lies at the hearty of the political debate about how long the country stays at Level Three — and in a sideline debate about whether the Government is being overly influenced by the health professionals in the caution with which it is moving on the matter.

NZ First Leader, Winston Peters and Bridges believe it is.

But the Prime Minister, Jacinda Ardern, argues that New Zealand can gain an economic advantage if it eliminates the virus.

And yesterday she had the promise of a new investment by Microsoft to use as support for her argument.

“It is my view that by tackling the virus, we have positioned our economy to be able to rebuild ahead of many others globally,” she said.

“That is our safe-haven strategic advantage.

“International companies like Microsoft wouldn’t be investing here or looking to invest here if they didn’t have full confidence in the New Zealand economy that we are ready to welcome quality investment and offer a safe place for operation in both a health and business sense.”

Bridges, on the other hand, has taken to clashing with Bloomfield, presumably in an attempt to make the same point Peters did when he revealed that Bloomfield wanted the border closed to New Zealand citizens.

Both are attempting to discredit Bloomfield to support their argument that the economy should come first.

Bridges got personal in his attacks yesterday and claimed that Bloomfield had hired 50 “top dollar” communications staff.

Accusing the Director-General of delaying written answers to Committee questions, he said: You don’t want to answer because you want to control the information flow and do this in a time and a way convenient to you and the Government.”

Later during a discussion about how New Zealand’s restrictions compared with Australia, Bridges accused Bloomfield of selectively quoting examples from the most restrictive states in Australia.

Labour MP, Michael Wood, apologised for Bridges’ attacks to Bloomfield.

I regard, and I think many people regard the suggestions in the earlier line of questioning that you have been obstructive or that you’re acting as some kind of a front for political masters to be baseless,” he said.

The irony in all this is that though things are bad, they are not as bad on the economic front as Treasury had forecast (and Bridges had claimed)  and nor do they appear to be as bad on the health front as the professors might fear.