Nothing to back up claim
Yes Minister, the buck stops here. Stand by your own policies rather than shifting blame
Recently, inanarticle published in the Financial Times, Newzealand’s Financeministergrant Robertson defended one of the world’s toughest Covid-19 lockdowns following a record economic contraction, insisting the restrictions saved lives and wasfacilitating a strong recovery.
Robertson suggested that “the best economic response remains a strong public health response”.
Newzealand’sgdpcontracted by about 12 per cent in the second quarter. But probablymoreimportant is what lies underneath thosegdp figures. According to current forecasts, wewill expect to see fairly high levels of unemployment till at least 2027.
It is likely that the current unemployment figures are conservative because one would really need to account for thewage subsidies that are inplace now. If a lot of workers get laid off once the subsidies expire then the unemployment rate will obviously jumpup.
Long termit is alsoworth thinking about our debt levels. Deficit financing under current circumstances is certainly not unusual. Our current debt levels are not that high compared to others like Japan, Singapore orgreecewhose debt amounts tomore than 100per cent of GDP.
But it is worth noting thatnzmore than trebled its net debt this fiscal year alone.
Netcrowndebt is forecast to peak at over $200 billion in three years’ time, from around $57 billion preCovid-19. That is $143 billion of additional borrowing. Thiswill becomea significant burden for today’s younger workers, whowill also be themost adversely affected by the economic fallout of Covid-19.
Robertson’s responses are problematic at multiple levels.
First, if it is indeed the case that the best economic response is a strong health response in the formof stringent lockdowns, thenwhydoes Robertson not commission a study to showus the data that backs this up? Robertson can pick anyone he wants as long ashe gets representatives from the Treasury, the Reserve Bank and the Productivity Commission and someindependent economists with serious research credentials and peerreviewed publications such as Martin Berka of Massey or John Gibson of Waikato, whohave already worked onthe relevant cost-benefit modelling.
Theonly independent study conducted so far, that I amaware of, is the Productivitycommission one showing the opposite of what Robertson claims.
Robertson’s answer is also disingenuous becausemost people realise that the Government has pivotedawayfrom its so-called elimination strategy and has quietly decided tomanage the virus without actually saying so.
This is apparent from the current tinkering of the alert level settings and also the fact that even Robertson’s colleaguesdonot take theirown proclamations seriously. Recently, the Herald featured a photo of Ashley Bloomfield taking a selfie with an elderly gentleman and guess what? Nomasks on either face. The same wastrue of the Primeminister as she toured Massey’s Palmerstonnorth campusand took selfies with large groups of admirers.
Another example. Theuniversity of Auckland recentlymadenewsfor supposedly “forcing” students back to campus. Indoing so, the university and its Vice Chancellor were following clear guidelines laiddown by theministry of Health until Ashley Bloomfield declared that gatherings ofmore than 10 were not allowed. In doing so he wascontradicting the guidelines laiddownby hisown department.
Thethird reason I find Robertson’s response troubling is the following comment: “It’s agameof two halves, to use a rugby analogy. In the short term, Newzealand is better thanwas expected,” said the finance minister. “But themediumand long term is morechallenging andweput that very squarely at the feet of the global economy.”
Comeon. If youare going to impose significant economic hardshiponmanybecause the “best economic response remains a strong public health response” then at least have the courage of conviction to stand by yourownpolicy choices.
It is not Covid-19 or the global economycausing all of this. Someof this is the result of ourownpolicy choices. Ifyou think the economic cost and hardship is worth it in the long run, then at least stand by your ownpolicies rather than shifting blame.
The fact remains that this Government launched into a set of policy choices without adequate forethought or consultation about the consequences. Nowthat those consequences are becoming clear, it is scrambling to find anappropriate response. After having staked its reputationon elimination, ego and hubris is making it difficult to change course.
But recovering fromthe coming recession requires that the Government doessomesoulsearching and adapts its future approach by calling uponawide range of experts and expertise.
Covid-19 would have been challenging enough butwemade thingsmoredifficult for ourselves by not investing the time andeffort to think through alternative scenarios.
Recently, an interlocutor asked me: Wherewouldyou rather be, if not innewzealand? I find this to be a nonsequitur.
For one thing, the outlook for a middle-aged tenured professor is vastly different fromthat of a young family strugglingwith debt and mortgage payments while worrying about their jobs. Andsecondly, just becausemanyothers around us are losing their minds does notmake irrationality rational.