‘Short, sharp beats drawn-out pain’

A short, sharp lockdown may be better for the economy than drawn-out pain and uncertainty, economists say.

Prime Minister Jacinda Ardern has announced the country will move to a lockdown in 48 hours, and all non-essential businesses will have to shut if they cannot work from home.

The lockdown will remain in place for at least the next four weeks, in which time it is hoped the virus will be under control.

The Government is increasing its support for businesses and introducing other measures such as rent freezes.

Economist Shamubeel Eaqub said the four weeks of intense economic pain would be better for the economy long-term.

‘‘You want to try and have as short and sharp a disruption as possible with as much support as possible in the beginning.’’

Economist Tony Alexander said the effect of a four-week lockdown was a price worth paying. ‘‘It will be mitigated by the Government using its financing and sovereign taxing ability [to repay debt] to do what the private sector cannot – shift the burden through time. Taxes will be higher down the track to pay for the assistance which will flow now to get as many businesses and people through to the other side without having to close down, leave their rental property, or be forced to sell.’’

ASB chief economist Nick Tuffley said the short-term impact would be a significant disruption to the economy. ‘‘What we are looking at long-term is the potential to get on top of the virus sooner with far fewer casualties.

‘‘It is a hard choice to make but the trade-off is we either go into a lockdown to stamp it out early or we go into a lockdown later because it has spread,’’ Tuffley said.

Infometrics economist Brad Olsen said it was critical to control the spread of Covid-19.

‘‘If we don’t, people will die and the long-term impact of this loss of life will be catastrophic for the economy. It is important we take heed of the level four restrictions and lockdown of the economy,’’ Olsen said.

‘‘The lockdown ... will cause an immediate and irreversible decline in economic activity – people will simply not be able to work, money cannot be earned or spent in the same way as before.

‘‘Unemployment will rise significantly, and businesses will close very quickly.

‘‘The New Zealand economy is now in survival mode and must hibernate through this incredible period of disruption.

‘‘There are no good options here from an economic standpoint, and that is why lives must come first, and we must follow the advice of health experts and the Government.

‘‘The pandemic is the most severe and widespread hit to the New Zealand economy ever,’’ Olsen said.