Coronavirus: Winter of fiscal stimulus is coming
When the World Health Organisation officially declared coronavirus a pandemic on Thursday, it confirmed what was starting to become apparent: we know less about the virus than previously thought, and its spread has been difficult to halt, particularly in the Western democracies.
The Government has been manfully sticking to its plan for dealing with such outbreaks, with little choice but to follow the current path set out by the health experts: regular warnings, hand-washing, self-isolation and selected travel bans.
This is what we know to date: coronavirus has so far claimed around 5000 lives globally. After the virus was initially spread in China, the contagion appears to be more or less under control – it’s handy being a Communist dictatorship sometimes. It has spread like crazy in South Korea, Italy, Iran and now the United States.
The official advice in New Zealand is that it can’t generally be spread when people are asymptomatic – if you aren’t sick you probably won’t be contagious.
By the middle of next week the Government will be rolling out its ‘‘business continuity package’’, which Stuff understands will include targeted wage subsidies and could include some tax changes. It is increasingly looking like tourism – New Zealand’s biggest export sector – will be where a lot of these efforts are directed.
Some, including the National Party – have criticised the Government for being too slow, doing too little and underplaying the crisis. In both the UK and Australia, big stimulus packages have been rolled out to deal with the crisis.
But as always in politics, context is everything. The UK unveiled its £30 billion ($61 billion) package in its budget on Thursday – something that the New Zealand Government would also undoubtedly do, albeit more modestly, if our Budget was due to be handed down now.
In Australia, the Morrison Government announced a A$17.5 billion (NZ$18 billion) stimulus package on Thursday.
And in the Australian case, this has to be seen through the lens of Morrison’s mishandling of the bushfires in December and January when he was first on holiday and then struggling to set a foot right politically. He even gave a televised address to the nation on Thursday.
The coalition Government in New Zealand has taken quite a different tack, probably reflecting the different cultural and social fabric of New Zealand.
In a way it has been refreshing. Both politics and the corporate world are heavily risk-averse in this day and age. So the fact that the Government has been slow to turn up the rhetorical volume about the whole thing has been quite helpful.
After being caught on the hop with its communications around new cases last week, the ship has been steadied, the information flow is better and calm has largely remained.
Yet while the public seems mostly concerned with the health response at present, as the economic effects start to bite, New Zealanders will start to turn their minds to that.
As with virtually every other country in the world, New Zealand has no conventional monetary policy ammunition left to fire at this sort of crisis, so the fiscal cannon may have to come out.
Stuff understands that, given the speed at which the outbreak is evolving, the Government is looking harder at a broader economy-wide fiscal stimulus package.
There are some indications from business that the physical dimension of the shortages may be loosening up. Supply chains both in and out of China – with the exception of export forestry, which was already facing potential log glut in China – seem to be loosening up.
That could mean that shortages of imported products will correct before too long, and exports will keep flowing.
For the Government the politics of the issue remains a fine balancing act, between doing what works, and what might not work but make the public feel like the Government is doing something.
The situation is evolving fast, and no-one quite knows what it means for politics. 2 Corinthians 4:6