The Government is managing the Coronavirus crisis using the same procedures it would a natural disaster or terrorism emergency.
This comes as its top economic advisors frankly admit they don’t know what the impact of the virus will be on the economy or how long the crisis might last.
But the Prime Minister has triggered the Officials Committee for Domestic and External Security Coordination (ODESC) to oversee the investigation and precautionary response.
ODESC reports through the Department of Prime Minister and Cabinet directly to the Prime Minister and has set up a multi-agency group to oversee the whole response process. It does not hold regular meetings but is convened by the Prime Minister when there is a crisis.
At the same time, Treasury has set up a 24 member multi-agency economic advisory committee (Covid-19) to keep it alerted to the impacts the various trade and travel bans are having on the economy.
Twenty four agencies are represented including the DPMC, Ministry of Health, Customs, Education NZ, the GCSB, Ministry of Foreign Affairs and Trade, the Police, Tourism NZ and the Ministry of Primary Industries.
Treasury Secretary Caralee McLeish told Parliament’s Finance and Expenditure Committee yesterday that the department had a senior staff member based in Singapore giving regular updates on the situation in Asia.
“We’ve got a message overnight highlighting some of the steps of visitor arrivals in Changi Airport, as well as providing information on various government responses,” she said.
And the Government Security Communications Bureau (GCSB) Director-General, Andrew Hampton, told Parliament’s Intelligence Committee last night that the agency was involved in the Government’s response but said he would talk about it in closed rather than an open session.
It is clear that the Government regards Coronavirus as a major crisis with the potential to get worse and to do considerable damage to the New Zealand economy.
But so far, both Treasury and the Reserve Bank are putting an optimistic spin on their forecasts as a consequence of the virus.
“It’s still relatively early days,” McLeish told the Finance and Expenditure Committee.
“And the precise economic impact on New Zealand is unclear.
“Experience with previous outbreaks such as SAR’s indicated that while there is an initial impact, once the virus is contained, then typically you would see the economy bounce back quite quickly.
“And so that is a scenario that we think may come into play.”
Finance Minister Grant Robertson was willing to put an interim number on the potential impact of the outbreak on the economy albeit that he heavily qualified it.
“ Economists from banks and also from the international community are predicting that this could shave around 0.3 per cent of Chinese GDP,” he told the Finance and Expenditure Committee
“If that flows into New Zealand, you can make a calculation of around about 0.1 per cent, but that is just at the very, very early stages of what we’re seeing at the moment.
“It is quite clear that there is some way to go in this.”
The Reserve Bank yesterday held the official Cash Rate at one per cent and in its Monetary Policy Forecast said the projections incorporated a scenario where the coronavirus outbreak had a temporary economic impact on New Zealand, mostly during the first half of 2020.
“Ultimately, estimating the economic impact of the coronavirus outbreak is extremely difficult,” the Bank said in its statement.
“Although history provides some guidance on reasonable assumptions, the eventual outcome will depend on how long the outbreak lasts, how widely the disease spreads, and how people, firms, and governments respond.
“In any case, historical experience and available information suggest that the pace of economic growth over the first half of 2020 will be slower as a result of the outbreak.
“Should there be a substantial outbreak in New Zealand, the economic and social impacts could be significantly broader than described here.”
Speaking to journalists, the Bank’s Governor, Adrian Orr said it had already had an effect.
“We’ve taken, half of the GDP growth we expected in the first quarter off the table and some of that will remain off the table,” he said.
“You can’t suddenly re-export the crayfish or make the tourists come back in a season.
“So that has a direct impact.
“Having said that, no one and particularly a central bank can project how long or how serious this issue is.”
Orr said the Bank was “shaving” its forecasts for tourism, logs, crayfish and education “and so forth that we are hearing about.
“We’ve allowed that to also linger for some time.
“But we’re on the working assumption that some sense of normality around travel, travel restrictions, etc. returns over the month of March or there or thereabouts, but persists for a while.
“So there are many working assumptions that we’ve put into the projection, and we’re trying to be as clear as we can be with those assumptions so that people can see what have we included as well as what else might we have to include if this persists and gets more serious.
“What we might have to include become second-round impacts, trade channel impacts, business confidence and investment impacts all of the usual suspects.”
It was Robertson who offered the most sober of all the forecasts saying that how far and how severe the impact would be related to the public health aspects of the crisis.
“This is a novel virus,” he said.
“It’s taking time for people to understand how it is mutating.
“It’s taking time to understand the level of transmission so we are at the moment at a very delicate period in this and as a government, we continue to take it very seriously; monitoring daily, talking to industry daily and at this time there will definitely be an impact, but the scale of that is yet to be seen.”
What yesterday showed was that neither the Government nor the Reserve Bank knows how the Coronavirus crisis is going to end.
It, therefore, remains the wild card this election year, which is why it is being treated so seriously.
