Measuring, let alone solving, economic crisis is complex

As a positive example, Mr Bagrie cites the $13 million in May’s Budget to beef up the Commerce Commission.

‘‘We talk a lot about incomes being low, but part of New Zealand’s problem is costs being high. We actually need more competitive pressure. So who’s next after the oil companies?

‘‘That’s just one example of how you don’t need big, grand economic stuff to potentially make a difference on the other side.’’

While the Government has a big role to play in deploying its balance sheet and minimising losses, it is ultimately the private sector where the jobs will be created sustainably, he says.

‘‘The key thing in regard to creating sustainable jobs and putting money in peoples’ pockets is how fast the economy can grow over the next five to 10 years.

‘‘So you have to think about the foundations for that growth.’’

There are three of those, he says: labour supply, capital investment and productivity.

New Zealand’s growth across the past 10 years has in large part been underpinned by immigration increasing the labour supply.

‘‘Are we going to see the same levels of labour supply growth for the next 10 years? . . . the answer is: no way.’’

Capital investment? Mr Bagrie thinks we will struggle.

‘‘I think firms are going to run more conservative balance sheets.’’

That leaves productivity improvement, which for many years has been the area where our otherwise robust economy has failed to fire.

Could the pandemic actually be the productivity driver we need?

There have already been some good things to come out of the crisis, Mr Bagrie says.

Primarily, that has been the rapid uptake of new technology — as those of us who suddenly learned to video conference this year already know.

The flip side is that if we have to live with the virus we will be forced to make society safer, and the extra rules and regulations will probably detrimental to productivity, Mr Bagrie warns.

Mr Alexander also hopes this crisis might sharpen up our economy.

In fact, he says, after unemployment it might be his second most important indicator of a successful recovery.

‘‘God knows how I’m going to measure this,’’ he says.

‘‘But it’s that businesses have set themselves up to take advantage of demand when it does come along in a sustainable way.

‘‘While we have the negative on the economy with the virus, the lockdown, the closure of the borders . . . there is also a weeding out across all sectors as businesses adjust to massive changes in their operating environment.’’

He thinks the New Zealand economy was overdue for this kind of rejuvenation process.

‘‘I thought it would take three years to do that and it would start this year. Well, it’s started this year and it’s all going to be done by the end of the year,’’ he says.

‘‘Out of that will come some very lean, mean, slim, efficient New Zealand businesses well set to take advantage of the longerterm recovery when it comes along.’’ — The New Zealand Herald