Treasury still unsure how much of Covid cash actually spent

The Treasury is publishing more granular information on what became of the tens of billions of dollars put towards the Covid-19 response.

Nonetheless, it still doesn’t know what portion of the public money allocated towards the response has physically been spent.

The issue, over which the AuditorGeneral has voiced his concern, is that information related to some Covid expenditure was organised differently to the way expenditure is conventionally accounted for.

Big-ticket initiatives, such as the Resurgence Support Payment, were accounted for traditionally, receiving their own appropriation (or line) in the books. This makes them easy to track.

But other initiatives, such as Increasing Wellbeing and Mental Health Support to Learners and Education Workforce, didn’t receive their own appropriation.

Rather, money was allocated towards achieving the outcome via a number of appropriations, some of which weren’t exclusively Covidrelated. This makes these initiatives difficult to track.

The Treasury can now say that of the estimated $55 billion allocated to Covid-specific appropriations, $36b had been spent by the end of June 2022. Of the unspent funds, $9b was returned to the Crown’s main kitty, some of it for non-Covid use.

The Treasury can also confirm that an additional estimated $26b was put towards Covid (for initiatives such as Increasing Wellbeing and Mental Health Support to Learners and Education Workforce) via existing appropriations. But it doesn’t know how much of this has physically gone out the door.

The difficulty is, the $26b was allocated through more than 200 appropriations, whereas the $55b (for large initiatives) was allocated through around 80 appropriations.

The Treasury could in theory have created a new appropriation for every Covid-related initiative, no matter how tiny, for the sake of clean accounting.

But it decided to take a more pragmatic or proportionate approach and plans to provide more information on that $26b in late May/early June.

While there is a difference between what has been allocated and what has been spent, there is also a difference between what has been appropriated and what the impact is on the Crown accounts.

For example, the Government might appropriate x amount to increase benefits.

But the net effect on the Crown accounts will be lower because welfare recipients will give some of this back when they pay tax.

While this piece has focused on the nearly $81b appropriated ($55b plus $26b) towards the Covid response, the more commonly used measure when Covid costs are discussed by policymakers is the “fiscal impact”, or the impact to net core Crown debt.

The Treasury put this at nearly $71b, including $12b for the initial Covid response package unveiled in March 2020, plus $62b for the Covid Response and Recovery Fund, minus $3b for repurposed funding.

The value of the New Zealand Government response to Covid was large by international standards.

The International Monetary Fund put it at 19 per cent of gross domestic product (GDP), which is above most comparable countries other than the United States (25 per cent).

Nonetheless, because all the spending was stimulatory, the economy and tax take grew, so the value of government debt to GDP remains low by international standards. New Zealand’s net core Crown debt was equivalent to 40 per cent of GDP in January.

New Zealand’s Covid-related death rate is also low, according to the World Health Organisation.

At 56 deaths per 100,000 people, New Zealand’s death rate is below that of Australia (82), the United Kingdom (320), Germany (208) and the United States (349), but is above that of Singapore (31).