Ardern’s decision of a lifetime

Today, some time after 10.30am, Prime Minister Jacinda Ardern and her Cabinet will make the decision of their careers.

At 4pm, we will know the answer to their long deliberation and whether or not the country will loosen its rigid level-four lockdown rules and move to the slightly less punitive level-three alert.

It is no easy choice. Lifting lockdown early risks undoing the remarkable curve-flattening achieved to date.

We would have to go back to level four or face some of the worst-case scenarios that were put to the Government last month, with models showing deaths of between 8560 and 27,600 people, depending on how things played out.

But every unnecessary day in lockdown is a job lost and a business destroyed. While the Government says level three isn’t all that different to level four in terms of what people can do – there will be no hugging, dinners out at restaurants or picnics in the park – the difference between the levels is big for the economy.

Treasury thinks level four reduces economic output by a punitive 40 per cent, while level three hits output by a comparatively modest 25 per cent.

The decision isn’t a straight one between the economy and people’s health, Covid-19 isn’t the only thing that kills people after all; an economy shrunk to a little over two-thirds its present size – the current worst-case scenario – won’t pay for very good healthcare.

A poorly performing economy can itself be deadly. Unemployed people are two to three times more likely to die by suicide, and poverty tends to correlate with generally poorer health.

The choice isn’t necessarily between health and the economy: it is which path keeps people happier and healthier. Working that out is no easy task.

The Government is probably biased towards extending the lockdown even by a short period of time and perhaps only in specific parts of the country.

Advice from the Treasury and comment from the major banks says that going back into level four after first coming out is worse for the economy than staying in for longer in the first place.

Ardern said she would be weighing up the economic impact of her decision but the decisionmaking seems stacked in favour of advice from health officials, rather than economists.

Director-general of health Dr Ashley Bloomfield will dial in to the Cabinet meeting — itself highly unusual, as meetings are, with very rare exceptions, the exclusive province of government ministers.

His advice will form the backbone of the decision, with Ardern saying yesterday that she would want Bloomfield to be satisfied with the data available and the country’s contact tracing capability before she considered moving levels.

But, despite the Government’s desire to make this a decision based on the advice of scientists and bureaucrats, the choice ultimately rests with Cabinet, with all its attendant politics.

Labour’s monopoly on the crucial portfolios of health, civil defence and finance give the party’s stance some heft.

NZ First’s position has been more difficult to ascertain. The party has been sending out mixed messages – at once sounding the economic alarm, while elsewhere attacking reporters who deign to write that the party is frustrated with the way health officials have allegedly captured Labour ministers.

The concerns of the Green Party are a non-starter. Its ministers are not in Cabinet and have no sway over its lockdown decisions, a consequence of the party’s half-in, half-out confidence and supply agreement.

Politicians will, of course, have an eye to the polls. Public support for the lockdown so far has been high and leaked internal polling puts the governing parties at dictatorial levels of polarity.

But this alone will not allay political fears. Polling day remains September 19, just two days after Stats NZ will publish economic data for the current quarter. It is likely to reveal the most severe economic contraction in modern times, showing a severe slump for the economy.

Voters may thank the Government for steering them through disaster but there is no guarantee they will want the same team in charge on polling day.

The Government’s line is that public health and the economy are one and the same thing. A prolonged public health crisis with the country forever going in and out of lockdown will be bad for business.

The emerging consensus from health experts and economists is a little longer in lockdown could make all the difference between elimination and a prolonged outbreak and its attendant economic consequences. But that decision comes with economic pain of its own, and possibly very little reward come the election.