MInisters Carmel Sepuloni, Chris Hipkins, Kelvin Davis; the Prime Minister, Jacinda Ardern; Megan Woods and Grant Robertson meeting in Auckland the day after the election last October.

One of the country’s leading economics consultancies, Infometrics, has published a report today saying there is no evidence that the Government is ready to address long-standing issues which have festered for the past 10 – 15 years.

Its comments echo what is becoming an increasingly voiced view in Wellington that the Government’s plans for the country post-Covid are opaque.

The question being asked, even at public sector levels, is whether the Government is ready to move from a crisis management mode to a more long term strategic mode.

To be fair to the Government, Ministers currently have their hands full not only managing Covid but are also saddled with the most significant list of Government reforms since the 1980s.

For example, the long-overdue restructuring of the health sector, particularly the fragmented and under-performing district health boards, will be unveiled next Wednesday.

In many towns and cities in New Zealand, the DHB is the largest employer.

Health Minister Andrew Little’s reforms have the potential to impact that huge health workforce in much the same way the establishment of the State-Owned Enterprises impacted state sector workers in 1987, albeit that redundancies on a 1987 scale are highly unlikely.

The likely political backlash is already evident in a line of questioning that National’s health spokesperson, Shane Reti, has been pursuing and which he displayed in Question Time yesterday.

He asked Grant Robertson (standing in for Jacinda Ardern) whether the restructuring would be delayed for two “ given the health sector is currently focused on rolling out the coronavirus vaccine across the entire country?”

Clearly, National will play to parochialism and oppose the restructuring.


But add to that the Climate Change Commission carbon budgets, the Resource Management Act reforms and the three waters changes, and this is a Government that has a lot on its hands.

A measure of how much came with a response recently from Health Minister and Minister in Charge of the Security Services, Andrew Little, who said work on implementing the changes recommended in the Royal Commission on the Mosque shootings would not even begin until the second half of this year.

All this has to be set against a  background of an uncertain economic future.

The roll-out of vaccines both in New Zealand and around the world is providing light at the end of the COVID-19 tunnel, but the coming year will still be a challenging one for the New Zealand economy, according to Infometrics’ latest forecasts.

After a probable recession to start the year, growth will remain patchy throughout 2021 as tourism struggles with lower-than-normal revenue – even with the Trans-Tasman bubble in place.

“Even by March 2023, we only expect tourist numbers to New Zealand to be at 58% of their pre-pandemic peak,” says Infometrics Chief Forecaster Gareth Kiernan.

“Reduced airline capacity and the loss of previous routes, higher ticket prices, and more complicated and uncertain travel requirements will all constrain the medium-term recovery in international tourism.”

Kiwis face higher costs across the board, with the pandemic now creating clear inflationary pressures.

Disruptions to international supply chains have been occurring for over a year, but these issues are now feeding through into higher transport costs that are increasingly being passed on to domestic customers.

In addition, a continued lack of access to foreign workers is creating skill shortages for many industries.

These capacity constraints, combined with other factors such as higher cleaning costs and increased sick leave requirements, are leaving businesses with little choice to raise their prices.

Infometrics does not expect the Reserve Bank to raise interest rates before 2023, despite a spike in inflation in the coming months.

The Bank will be reluctant to tighten monetary conditions given the uncertainty still hanging over the economy, and it will also be wary of doubling down on recent policy changes that are likely to halt the housing market’s momentum this year.

“We do not expect house prices to fall because of recent government policy changes,” says Mr Kiernan.

“However, there are already signs that investor demand to purchase property has softened. If anything, we expect to see demand shift towards new dwellings, although meeting that demand immediately will be difficult given the lack of spare capacity in the residential construction industry.”

Infometrics notes concern about New Zealand’s vaccine roll-out to date and the potential for this programme to fall behind schedule, which could hamper New Zealand’s “reopening” and economic recovery in 2022 and beyond.

Along with a focus on delivering New Zealand’s vaccination programme, the Government must also make use of its majority and political capital to address long-standing issues more fully, such as the housing crisis, its effects on poverty, and climate change.

“As we have seen over the last 10-15 years, a lack of clear direction and action means that the problems will simply continue to get worse while the talkfest continues,” said  Kiernan.

There are warning signs.

Michael Reddell, the former Reserve Bank economist and “Croaking Cassandra” blogger, has highlighted IMF forecasts which show that between 2019 and 2026, New Zealand’s GDP per head will have risen by 4% while Australia will have gone up by nearly 8%.says

The IMF itself, in its April World Economic Outlook, says the key question facing policymakers is the extent

of persistent damage (scarring) that may result from the Covid crisis.

“History suggests that deep recessions often leave long-lived scars, particularly to productivity,” it says.

In New Zealand, those “scars” are going to be most obvious in the tourism and international education sectors.

These pose their own knock-on issues.

How will a slow recovery in tourism impact regional economic development?

What are the long term implications of a reduction in international paying students for schools and universities?

In a major speech to Business New Zealand exactly a year ago, Finance Minister Grant Robertson set out three “waves” in terms of managing the Covid crisis.

The first was to fight the virus and cushion the blow, then to kickstart the economy.

Few would argue that the Government has not achieved those goals.

But Robertson had more lofty ambitions.

“The Future of Work has arrived, and it looks a bit different than I imagined, but it is the challenge I have been waiting for,” he said.

And so, he said, we must take the opportunity to reset the economy;  to take account of the massive disruption to some sectors, “but also to address some of the long-standing challenges we face.”

“We must answer the big questions about our economy in these unprecedented times,” he said.

“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?”

Underpinning all of this, he said, inequality must not be allowed to take hold in the recovery.

“The importance of the role of the state has been underlined by this crisis,” he said.

“I hold a strong personal belief in the power of the state to do good.

“It is through a well-funded, highly functional public service that we have had the ability to coordinate and provide leadership for New Zealanders, guiding both the public health response and the economic response to this crisis.

I believe it is of the utmost importance that the state continues to play an active part in the economic recovery, providing leadership and direction as we move forward through the challenging times ahead.”

But that speech was on April 15, 2020.

Robertson has yet to provide a set of answers to the questions he asked and that it is what is beginning to raise questions in the capital.