Pre-election Economic and Fiscal Update – economy “better than predicted”

The Pre-election Economic and Fiscal Update has been released today. Minister of Finance Grant Robertson’s take on it:


  • PREFU shows economy doing better than forecast
  • Unemployment to peak at 7.8%, down from 9.8% forecast in the Budget
  • Year-to-June accounts show tax revenue, debt and OBEGAL better than forecast
  • Global forecast downgraded as COVID-19 second waves and uncertainty grows
  • Balanced plan to support critical public services, manage debt and reduce the deficit caused by COVID-19

The Pre-election Economic and Fiscal Update released today shows that the near-term economic recovery has been stronger than the Treasury and many economists predicted at the May Budget, as the economy bounced back strongly out of lockdown.

“The Treasury now forecasts the unemployment rate to peak at 7.8%, down from 9.8% forecast in the Budget, because the economy is stronger than expected. That compares to an expected peak of 10% in Australia, while countries like the US and Canada have already recorded unemployment peaks above 13%,” Finance Minister Grant Robertson said.

“The unaudited Crown accounts for the year to 30 June 2020 back up the evidence of a rebounding economy, with core Crown tax revenue of $84.9 billion coming in higher than the $82.3 billion forecast, indicating more activity than expected.

“Net core Crown debt was 27.6% of GDP at 30 June, compared to the Budget forecast of 30.2%, and the OBEGAL deficit of 7.7% of GDP at 30 June was lower than the 9.6% forecast.

“These are signs that the New Zealand economy is robust, and that our plan to eliminate COVID-19 and open up the economy faster is the right approach. We can see this in the forecasts, with the New Zealand economy predicted by the Treasury to grow by an average of 4.2% across 2021 and 2022, compared to Australia at 3.6% and the US at 3.5%.

“The Treasury – similar to other economists – initially forecast June quarter GDP to fall by about 23.5% in June from March. In today’s forecasts, the Treasury has reduced that to 16%. All this goes to show is that forecasting month-to-month, let alone years in the future, is incredibly difficult with such an uncertain global environment and an unpredictable virus.

“However, global headwinds and this 1-in-100 year economic shock caused by COVID-19 will have a long-term effect on the Government’s books.

“The forecasts illustrate our balanced plan to manage debt and reduce the deficit caused by COVID-19, while protecting our investment in services like health and education.

“COVID-19 is hurting economies around the world but because New Zealand went into this with low debt and a growing economy, we will come out better than other advanced countries,” Grant Robertson said.

“Policies like the Wage Subsidy, business tax refunds and small business cashflow loans protected jobs and kept businesses going. We’ve also invested to secure PPE and ventilators, and make sure our testing and contact tracing systems are world-class. Taking on debt to fund this response is the right thing to do as we fight COVID-19.

“There is no free lunch here.These measures require significant investment. It has been necessary to use the Government’s strong financial position to do this.

“What counts is our strong track record. Before COVID-19, despite constant urging to the contrary we stayed disciplined with our spending and reduced debt below 20% of GDP while successfully investing in critical public services.

“Our strong starting position that means even at its peak of around 56%, New Zealand’s net debt will be considerably lower than other economies around the world – advanced economies went into COVID-19 with net debt averaging about 80% of GDP.

“The PREFU’s long-term projection model shows debt reducing to 48% of GDP by the end of the projection period. The difference between debt of 56% and 48% at the end of the projection period represents $46 billion less debt than if debt just remained at its peak.

“The projections show the deficit caused by COVID-19 reduces steadily each year from 10.5% of GDP this year, to less than 1% of GDP by June 2028.

“The PREFU also shows the benefit of locking in low interest rates for the long-term debt that has been used to fund the response, with annual core Crown finance costs forecast to reduce by around $800 million over the next four years.

“Because the Government can borrow for 20 years or longer at rates below 1%, it makes sense to lock these in now to fund the response before interest rates rise. Because the Treasury has already been able to secure more funding at lower rates, and because the Government’s cash position has improved since the Budget, the Treasury today announced it has reduced its debt programme over the next four years by $10 billion.

“There are challenges ahead, but we have a five point plan to grow the economy, support businesses and seize the opportunities created by our world-leading COVID response.”


While the economy may not be as bad as predicted the effects could have been delayed and may be yet to bite. Or not.

Looming job and work hours crunch

The number of people in work recovered in June but there are still 20,000 fewer jobs than before the effects of Covid hit at the end of March, and earnings are down – many people have had wage rates cuts and ordinary and overtime hours cut.

While the New Zealand economy has weathered Covid reasonably well (due to a large amount of Government borrowing) a deep recession is predicted.

The Covid wage subsidy, which is propping up hours and jobs, ends next month so there is a looming job loss and wage cut crunch, unless there’s a sudden turnaround in business activity.

Stuff: Job numbers continue to recover after the Covid-19 slump, but wages still down

The number of jobs filled has continued to rise after the April lockdown, according to Stats NZ numbers out on Tuesday.

Filled jobs were up by 2053 in June, to 2.2 million. This followed a rise of 14,399 jobs in May.

Stats NZ economics statistics manager Sue Chapman said there had been month-on-month increases over the last two months after the sharp drop in April of more than 35,000 jobs.

So that’s about 18,000 down from March.

“We calculate filled jobs by averaging weekly jobs paid throughout the month, based on tax data. Filled jobs include jobs paid by employers who are being subsidised by the Covid-19 wage subsidy scheme.”

But many people who have kept their jobs have had pay cuts. The subsidy for people who had been full time requires them to be paid at least 80% of their previous wages – many have had their pay cut to 80%.

Gross earnings for the three months ending June were down $304 million (0.9 percent) on earnings in the March quarter.

This was the first time since the series began in 1999 that June quarter gross earnings were lower than March, Chapman said.

“While job numbers dropped and then started to recover, it is clear that salaries and wages received throughout the quarter have taken a hit,” Chapman said.

And it is predicted to get quite a bit worse.

Christina Leung, principal economist with the New Zealand Institute of Economic Research (NZEIR) said around 2 million people were either on the benefit or the wage subsidy scheme, which represented around 53 per cent of the working age population.

Around 65 per cent of people employed are on the wage subsidy scheme, she said.

“We forecast job losses of over 200,000 by June 2021,” Leung said.

“We expect unemployment rate to peak at around 8 per cent in late 2022. 

That’s over a year away.

The wage subsidy runs out next month, but I’m hearing employers already looking at what to do from September, and a number are talking about job losses or further pay cuts.

The actual impact of that in numbers will be felt straight away by many workers, but the total numbers probably won’t be apparent until after the election.

And some cuts will be delayed. Many companies are waiting and seeing while propped up by the subsidy. Some have already signalled closures later – a department store in Dunedin will close next January.

The economic news isn’t all bad. Grant Robertson in parliament yesterday – 1. Question No. 1—Finance:

On Friday, Statistics New Zealand released overseas merchandise trade statistics for June 2020. These showed total exports were up from the same time last year.

Goods exports in June were worth $5.1 billion—up $107 million from June 2019. The rise was led by dairy; with milk powder, butter, and cheese up $90 million, or 7.9 percent.

The value of log exports was also up by 7 percent since June 2019. This strong performance from our exporters contributed to a monthly trade surplus of $426 million in June.

The trade deficit for the year ending June was $1.2 billion—the smallest annual trade deficit since December 2014. All of this effort by our exporters demonstrates the continued strength of that part of our economy, despite the difficult prevailing conditions arising from the COVID-19 pandemic.

This is just some sectors. While the trade deficit is relatively small that will be affected by lower imports. And some sectors, particularly tourism and hospitality, have been badly affected, and the outlook for them over the next few months looks bleak.

And we are not over Covid yet, especially world-wide, but as some places have shown (like Victoria in Australia) it can easily come back.

Stuff: Mortgage holidays could be extended, wage subsidy back if needed

Minister of Finance Grant Robertson said the Reserve Bank of New Zealand extending mortgage holidays would be “justified” as he confirmed that the bank is considering elongating the scheme for Kiwi borrowers whose pay packets have taken a hit from Covid-19.

Robertson, in an interview with Stuff, also said that if parts of New Zealand were to enter a new level 3 or level 4 lock down in the event of Covid-19 community transmission re-emerging, that the wage subsidy could be reinstated.

That’s if Covid comes back, but people are already significantly affected.

According to the New Zealand Bankers’ Association, at June 30, 7 per cent of consumer loans (almost 60,000 loans) had had all payments deferred, while another 8 per cent of consumer loans had reduced repayments.

That’s over 120,000 loans.

The next set of National Accounts are due to be released on September 17 two days before election day) and will show the extent of New Zealand’s recession. Those figures will include most of the level 4 lock down period.

Robertson said that $14 billion held back last week from the $50 billion fund the Government created to fight Covid was crucial to wheel out if the economy, which has turned up since lockdown, starts to wobble again. Such measures could be required if the global downturn starts dragging New Zealand down further, or if community transmission broke out, and new regional wage subsidies were required.

That won’t help the many workers likely to be affected when the subsidy comes off, presuming Covid stays away.

Dark economic outlook

Robertson also warned that although economic conditions in New Zealand are comparatively robust, the global economic outlook was looking darker by the day. Official figures come out with the Pre-Election Fiscal Update on August 20, but Robertson said that The Treasury has given him preliminary warnings.

“The New Zealand economy has definitely come out of this better and quicker than we thought albeit still tough circumstances. The global economic story is the opposite. It appears to be getting worse.”

So the New Zealand economy hasn’t ‘come out of this better’, the full impact of an international recession hasn’t hit here yet. And our current economic situation is propped up by billions of borrowed money.

And despite all the money being dished out many workers are likely to find things tougher still after the subsidy runs out next month.

My job is reliant on business getting going again in countries currently severely affected by Covid with no quick turn-around expected. My earnings are down to 80% and could easily drop to half time of not to zero if things don’t improve internationally over the next few months. I know of another local business cutting 50 jobs and cutting hours of remaining employees by 25%.

And with Covid cases rising world wide the worst may not be over.

Flaring virus threatens world economy’s sputtering recovery

The world economy’s fragile recovery is in danger of stalling.

A resurgence of coronavirus infections across the Asia-Pacific region, which was considered to have broadly curbed the virus more effectively than elsewhere, is being viewed as an early warning for the rest of the world.

The pandemic continues to rage in parts of the US, hot spots in Europe, and across big emerging economies including India and Brazil. With little prospect of a circuit breaker until a vaccine is discovered and distributed, governments are having to double down on the US$11 trillion worth of stimulus and unprecedented central-bank support unleashed since the crisis began.

The US Federal Reserve meets this week to decide on interest rates as US lawmakers debate another US$1 trillion fiscal stimulus package. The European Union has just signed off on a planned €750 billion crisis package and governments everywhere are having to extend support programmes.

While China’s economy returned to growth last quarter and readings on industrial output have shown a V-shaped rebound, both consumer demand and private investment remain weak.

The US rebound is stalling after coronavirus infections spiked in a host of states.

“The global economic recovery is at risk,” said Mark Zandi, chief economist at Moody’s Analytics. “Key to ensuring the global economy doesn’t slide back into recession in coming months is continued aggressive monetary and fiscal support.”

In New Zealand we may be heading for a job and earnings crunch in the next month or two, but that may just be a phase in amongst larger and longer financial turmoil.

Valuable lessons learned in pandemic response

The Government and Ministry of Health handling of the Covid-19 was also generally very good in the circumstances. For various reasons New Zealand was also quite lucky to avoid having many infections and deaths compared to many other countries.

But the pandemic exposed a lack of preparedness. Testing for the virus, border controls and contact tracing systems were all inadequate. There were significant problems sharing health data between regions and collating data for analysis – some data was still being distributed by fax. There were problems distributing the influenza vaccine.

Normal health care was interrupted and disrupted too much when many resources were allocated to dealing with Covid that were not required. Our health systems should be able to continue as much as possible as normal as well as being prepared for any sort of abnormal rush of infections.

Some of our hospitals and health systems are in poor condition, this is something that should be given urgent attention and funding.

Valuable lessons should have been learned, and improvements either made or planned.

This is important for future viruses, which are inevitable, but especially for avoiding as much second wave infections as possible from Covid. It seems inevitable that Covid will be back here, but if limited and controlled it shouldn’t become a big problem here.


What the Government does about the economic effects over the next few months and also the next year or two will be important.

here has also been a major business, employment and economic impact. Large amounts of money were quickly allocated to save as many businesses and jobs as possible. How successful this has been won’t be known for months at least. At this stage we simply don’t know what the medium term economic effects will be.

There is also a lot of debt that will hang over the country for years, decades.

Lessons should also be learned from the economic measures taken, but it may be had to undo or rectify some of these.

On top of this are international economic effects that are largely out of our hands but unavoidable in New Zealand. Huge debts have been racked up around the world. Trade has been badly disrupted. Tourism, a major factor in economic activity for many countries, including New Zealand.

Lessons should have been learned but there is a lot more to be learned as we go.


While typing this post I have heard there is a report out today on the condition of our hospitals and health systems. See Hospital assessment report highlights dire problems

Health and statistics reasons for staying at level 2 for yonks, but…

“…it would take anywhere between 27 and 91 days of no new cases for there to be a 95% probability that the virus is gone from New Zealand”.

In practice it is getting increasingly difficult for the Government to justify staying at Covid-19 Alert level 2. Based on their current stance it could be another three weeks before they decide whether to change alert levels again, while daily we have been seeing no new cases for more than a week now, and we are down to just one (known) active case.

There are purely health reasons, based on statistics, for staying at level 2 for longer.

Siouxsie Wiles: Many want to go to alert level one right now. I get that. But we’d be fools to rush

There are several reasons why holding at alert level two for a little longer is the right thing to do. The main one is that a run of several days with no new cases doesn’t mean that there are no undetected active cases of Covid-19 out there. Recent modelling by Professor Nick Wilson and his colleagues at the University of Otago estimated it would take anywhere between 27 and 91 days of no new cases for there to be a 95% probability that the virus is gone from New Zealand.

The lower estimate was based on the assumption that most people showing symptoms would go and get tested. The higher estimate was based on fewer people getting tested. In other words, those estimates are the difference between shrugging of that runny nose as an allergy or going to get tested for Covid-19 just in case.

I get why so many people want to move to level one, I really do. These last few months have turned our lives and our economy upside down. Just as they have right around the globe. We’ve made big sacrifices and we feel we’ve earned it. But surely none of us wants to risk going back to alert level three. Alert level one will come. Let’s not squander what we’ve achieved.

That’s from an academic who presumably doesn’t have their job at risk.

But there is increasing pressure (with justification) for lowering the level for social reasons, for non-Covid health reasons, and particularly for economic and employment reasons.

More and more jobs are being lost (37.500 were lost in April), and when the 3 month wage subsidy runs out next month there are likely to be many more people who lose their jobs, and businesses who have to shut up shop.

As well as being devastating financially, that will impact on mental health and general health.

Health officials and academics with secure jobs and incomes may prefer to play ultra safe with Covid, but the rest of us have a lot of other things to consider and to be worried about.

The Government may be worried about what effect a second wave of Covid cases may have on their election chances.

They should also be worried about what effect a second wave of job losses and business failures might have, not just on their election chances, but also on the health of the country.

Full economic recovery may require vaccine

The US Federal Reserve Chairman  says that a full economic recovery may take well over a year, and it may be dependent on a Covid019 virus becoming available.

That isn’t a surprising prediction, as a return to unrestricted international travel is likely to also depend on a vaccine. Travel affects business, especially tourism. Airlines that survive may it difficult to get back previous levels of business if social distancing remains required.

Reuters: Fed’s Powell says full economic recovery may require coronavirus vaccine

Federal Reserve Chairman Jerome Powell said a U.S. economic recovery may stretch deep into next year and a full comeback may depend on a coronavirus vaccine.

“This economy will recover. It may take a while … It could stretch through the end of next year. We really don’t know,” Powell said in remarks aired on CBS’s “Face the Nation”.

“Assuming there is not a second wave of the coronavirus, I think you will see the economy recover steadily through the second half of this year. For the economy to fully recover people will have to be fully confident and that may have to await the arrival of a vaccine.”

Like governments a lot of businesses will need to rely on borrowing to survive, and that could be a burden for years.

The world economy is in part reliant on the US economy, as is New Zealand’s economy. We have done a lot of travel to and through the US, and a lot of business with them.

Covid deaths have now passed 90,000 in the US, with trends indicating that wil reach well over 100k by the end of May and still climbing into June – see Where The Latest COVID-19 Models Think We’re Headed 

Reuters: So far, no spike in coronavirus in places reopening, U.S. health secretary says.

U.S. authorities are not yet seeing spikes in coronavirus cases in places that are reopening but it was still too early to determine such trends, health secretary Alex Azar said on Sunday.

“We are seeing that in places that are opening, we’re not seeing this spike in cases,” Azar said on CNN’s “State of the Union” program. “We still see spikes in some areas that are, in fact, closed.”

However, Azar said identifying and reporting new cases takes time. A critical part of reopening will be surveillance of flu-like symptoms in the population and other hospital admissions data, as well as testing of asymptomatic individuals, he said.

“It’s still early days,” Azar cautioned in an interview with CBS’ “Face the Nation.” He said data will take some time to come in from states that reopened early such as Georgia and Florida.

There are now 315,000 deaths currently recorded world wide. It is difficult to predict what the trends are going to be over the next few months as US states as well as countries start to cautiously reopen.

Some countries have increasing problems, like Brazil and Mexico, and Russia is now second to the US in number of cases, but with an extraordinarily low number of deaths recorded.

Two of the worst hit countries are at lowering rates – Spain and Italy record lower death tolls

Spain has recorded its lowest death toll in two months with 87 deaths in 24 hours, while Italy recorded its lowest daily toll, 145, since lockdown was declared.

It was the first time that Spain announced under 100 deaths in a day since mid-March, which could be due to a delay in reporting over the weekend, the health emergency coordinator said.

Prime Minister Pedro Sanchez said on Saturday that the government would request to extend the state of emergency for another month as the country continues to phase out restrictions on movement amid the coronavirus pandemic.

The state of emergency was set to end on May 24.

Declaring the lowest number of daily deaths since 9 March, Italy is now looking to bring forward the reopening of some commercial activity in the country, with retailers, hairdressers, salons, restaurants and cake shops authorised to open from tomorrow.

Spain has been relaxing stringent restrictions over the lats week. But weekend numbers are lower then weekday numbers.

DW: Brazil overtakes Spain, Italy in COVID-19 cases

Brazil overtook Spain and Italy in the number of confirmed COVID-19 cases on Saturday, making it the fourth-largest outbreak in the world.

The country’s total number of cases rose to 233,142 after authorities logged 14,919 new cases, according to data form Brazil’s Health Ministry.

A total of 15,633 people have died due to the coronavirus in the country so far, with the country registering 816 new fatalities over the past 24 hours.

Experts have warned that due to under-testing, the actual figures could be as much as 15 times higher, cautioning that the worst could be yet to come.

Despite the rising case numbers and fatalities, Brazilian President Jair Bolsonaro has repeatedly downplayed the seriousness of the outbreak, dismissing the virus as a “little flu.”

He has also continued to attack lockdown measures implemented by some governors to contain the spread of the virus, and calling for businesses to reopen

“Unemployment, hunger and misery will be the future of those who support the tyranny of total isolation,” the far-right president tweeted.

RNZ: Brazil’s Bolsonaro sees second health minister quit

Brazil’s health minister has resigned after less than a month in the job following disagreements over of the government’s handling of the country’s escalating coronavirus crisis.

At his news conference, Teich did not reveal why he had stepped down. He just thanked President Bolsonaro for giving him the chance to serve as a minister and praised healthcare workers.

But he has clashed with the president over several aspects of how the government has dealt with the spiralling epidemic.

He disagreed with the president’s desire to widely use chloroquine as a treatment. The drug has gained widespread attention although the World Health Organisation (WHO) says there’s no definitive evidence it works.

Teich also butted heads with the president over plans to open up the economy, saying last week that he was not consulted ahead of an order that paved the way for gyms, beauty salons and hairdressers to reopen.

Case and death rates are increasing in Brazil.

A study comparing Denmark and Sweden claims that most of the drop in consumer spending is due to the virus itself and not the lockdowns. Newsroom: New paper calls into question benefits of Swedish strategy

Economists at the University of Copenhagen have found lockdowns have had little impact on consumer spending habits and that the true dampener of purchasing activity is the coronavirus itself.

The findings of the preprint paper, which may not have been peer-reviewed, call into question the premise of the much-touted Swedish strategy, in which the Nordic country has shied away from entering lockdown, suffering thousands of deaths as a result, in order to preserve the economy.

Transaction data for 830,000 Danes and Swedes from the second-largest Scandinavian bank found aggregate spending dropped by 25 percent in Sweden and 29 percent in neighbouring Denmark, which instituted a lockdown. Denmark has had 10,713 cases of Covid-19 and 537 deaths, while Sweden has seen 28,582 cases and 3529 deaths.

“In Denmark, spending drops sharply around the shutdown on 11 March 2020 and remains below the level in the reference period,” the researchers write.

“In Sweden, spending drops sharply at almost the exact same time although no significant restrictions were imposed. Presumably, this is no coincidence but reflects that the Danish shutdown responded to an escalating pandemic, similar in the two countries, with its own strong effect on spending. This highlights the empirical difficulty of separating the effects of social distancing laws and the pandemic they are designed to contain.”

In their conclusion, the economists argue that the lockdown resulted in just a 4 percent decrease in spending and that the virus itself was to blame for the vast bulk of the economic slump.

With no sign of a vaccine keeping the virus in check and getting economies back in action may be a long slow process.

The need to address both health and economic issues and also for stability

Some of the Covid debate has tended towards health versus economy, but it can’t be an either/or argument. Good health of the population is important for the economy, and a good economy is important for health and wellbeing – “there are many dimensions to health and well-being, many of which build fundamentally on economic stability”.

We had to go into some degree of lockdown, and we have to come out of lockdown. The big challenge is to do this as safely as possible as far as Covid health is concerned, but taking into account the importance of the economy in general, but also specifically in relation to individual and community health.

Many of us have kept a close eye on Covid data, numbers and rates of cases, deaths, tests and more.

Economic signals have been much more mixed, for example share markets plummeted, but have since recovered a lot of the lost ground.

But there’s a key difference – Covid proved to be able to spread fast, and deaths started to surge within a month of an outbreak. Containment has been observable. In contrast a lot of the economic effects are spread over many things, and are likely to lag somewhat. Some companies and jobs will survive, and while some have already been lost the economic impact will take months (at least) to play out.

One of the go to websites for data has been the Johns Hopkins University Covid map.  Caitlin Rivers is an assistant professor in Outbreak science + epidemiology + health security, but she acknowledges the importance of considering both health and the economy,

I’ve been noticing a dangerous polarization in our discussions around navigating our way through the pandemic.

She’s in the US were polarisation has been a growing problem since well before Covid struck.

Reopening is said to be playing games with people’s lives. Continuing stay at home measures is said to be without regard for the economy. This is a false choice.

We were the first group to put out detailed reopening guidance back in March, the same week that many states were issuing stay at home orders. The goal is and has always been to reopen – the question is how to do it safely

Staying home was always meant to be temporary, to prevent the healthcare system from being overwhelmed and to put in place capacities to enable a transition to case-based management. The question is how and when we will reopen. It was never about if we will reopen.

I’ve written about the answers to these questions extensively. The ‘how’ is through test-trace-isolate. The ‘when’ is as soon as we have that in place. The ‘then what’ is by re-introducing low risk activities, waiting to see what happens, and moving up from there. 

As I’ve said many times, what we want to avoid in the reopening process is creating the conditions that led to us having to stay home in the first place. The conditions of NYC, Lombardy, Wuhan. And yes, those places are all urban centers, but rural areas are vulnerable, too.

In April an average of ~2,000 people died of coronavirus in the US each day. That is more than daily average from cancer or heart disease. I fear there is growing complacency that this level of loss is a new normal. Are we really ready to add a new leading cause of death?

My answer to Q’s about whether x, y, z place is ready to reopen is to ask whether those places have the capacities, and if not, how do we build them. Yes, it’s a big lift, but (my current fav phrase) we have done hard things before. We can do this too.

But – and I’ve said this before too – there are many dimensions to health and well-being, many of which build fundamentally on economic stability. I worry as much as anyone about secondary consequences of e.g. poverty and other gaps in care of chronic conditions.

My job is to provide public health counsel, and so that’s what I do. It’s a missed opportunity to have a deeper discussion when I or other experts are set up in an either-or, economy-public health discussion. It’s about how we do both, safely

Again I’ll quote “ there are many dimensions to health and well-being, many of which build fundamentally on economic stability” – this suggests that now is not the time to launch into radical economic or social change, which would be certain to result in instability.

Questions on “safe economic activity” at lowered Covid-19 alert levels

Questions were asked at today’s Epidemic Response Committee about what different alert levels will mean to businesses wanting to restart. There seems to be a focus on “what constitutes safe economic activity”.

From Stuff Live:

Simon Bridges probing the “levels” in relation to the economy. Treasury’s modeling shows the lower the level, the better the economy. He said businesses are telling him they want to go to level 2. “Level 3 is a bit of a no man’s land”.

Grant Robertson is saying the detail of the lockdown coming this week will give business some clear guidance of what’s permitted. He’s saying it will show us “what constitutes safe economic activity”.

“I don’t share your view around level 3,” Robertson says level 3 will allow us to increase economic activity.

He says he’s been working with the construction sector to work out what safe economic activity looks like.

Robertson is saying the enthusiasm for coming out of lockdown early can actually mean yo-yo-ing between levels, which isn’t good for economic activity either.

Paul Goldsmith asking about “what sort of pragmatism” will be brought to the health regulations that will determine how businesses work under levels 2 and 3.

Robertson said work is underway on those issues, so there would be real clarity.

Contact tracing will be important too. “Knowing who is in your workplace, knowing where they are and what they’re doing”. This will help us manage flare ups as they come.

Responding to Marama Davidson, “the best economic response is a strong public health response”.

Sounds like a patsy.

University of Otago epidemiologist, Professor David Skegg, said countries that had not succeeded in controlling this disease, their economies were not going to flourish.

“I’m not an economist, but I would be very surprised if we’re going to do worse economically because of the measures we’re taking in the medium term.”

He stressed that the country should get to level 2.

“We need some careful planning this week on what level 3 or level 3.5 would look like.

“It’s not just a health issue and it’s not just an economic issue,” Skegg said.

From RNZ Live:

Simon Bridges said level 3 was akin to no man’s land with the downsides of level 4.

Finance Minister Grant Robertson said when deciding on moving to level 2 and 3, his focus was on “what constitutes safe economic activity?”

“Level 4 is doing exactly what we wanted it to do for New Zealand and New Zealanders. The last thing we want is to come out level 4 and create a situation where we have to yo-yo between levels.”

Meanwhile, Paul Goldsmith said businesses needed clarity on returning to work and how social distancing would look like in the working environment.

“There’s a shared desire among industry workers, government to get people back to work as soon as possible. Health and safety is a very important part of the workplace,” Robertson said.

“The best economic response is a strong public health response and that has to be underpinned by an investment in our health system.”

Stuff:

Michael Woodhouse asking whether the “principles approach” is sector based or risk based.

The question is really whether or not the businesses that open will be determined by the kind of business they are (for example cafes) or the kind of measures that are put in place by any business, so cafes that follow those guidelines could reopen, whereas the one’s that don’t implement the guidelines don’t reopen.

Robertson said it will be mainly the latter (so not sector-based) BUT you can’t completely detach sectors from the guidelines.

Bridges asking whether level 3 is therefore significantly more permissive than level 4.

No response given.

Robertson saying that in the case of the media, “the patient had pre-existing conditions”.

Media just about had comorbidity.

 

 

 

Business and the economy versus the ill, elderly and others

There’s no doubt that Covid-19 will have a very large impact on businesses and employment and livelihoods in New Zealand, and our economy will take a big hit. This will have happened regardless of the actions taken by the Government. It’s debatable what would be worse, doing more or doing less to limit the spread and infection rates.

It is also likely there will be deaths here. There are currently 368 confirmed and probably cases. Many of those will be mild to moderate and are being treated at home. Some are more serious and require hospitalisation.

Even with the relatively stringent lockdown cases are expected to rise for the next 7-10 days (or more if people flout the restrictions on movement away from home).

There is no doubt that without the level 4 lock down there would be a lot more spread, many more people catching the virus, and a real risk of quite a few deaths.  This shows how easily it can spread even with restrictions:

Marist College, Auckland – 18 confirmed cases, 1 probable
Private wedding, Wellington – 10 confirmed cases, 2 probable
Rest home, Hamilton – 11 confirmed cases

Older people and people with existing medical conditions (especially lung or heart) are particularly susceptible to Covid-19, but this is hardly surprising, they are also more susceptible to other viruses and illnesses. Younger people seem to generally have milder symptoms – but they can still spread the virus.

There have been suggestions that the virus should be left to take it’s course, to build ‘herd immunity’. This must accept an inevitable casualty rate – people would die, possible quite a few people.

It has been suggested elsewhere and also here that it isn’t a big deal that old people and people with illnesses might die of Covid-19. They die of other things anyway, Covid will just knock them off a bit sooner.

From Australia Victoria’s first two coronavirus deaths were cancer patients caught in Alfred hospital outbreak

Victoria’s first two coronavirus deaths were cancer patients at The Alfred hospital, and a further five cases of COVID-19 have been confirmed among patients and staff.

Duker commented on this:

Bingo! It seems like northern Italy all over again, the sick people get sicker and the elderly have less chance to recover.
It’s a fact of life and one day it will be my turn.

I’m quite disturbed by this attitude.

It’s a fundamental fact of life that we will all die, eventually.

But it is also a fundamental facet of a decent society that we don’t just do nothing to prevent old and ill people dying of any new virus or disease, treating them as expendable.

We put huge budgets and resources into health care to try to keep everyone alive as long as reasonably possible.

People who get old often live to get quite a bit older after having illnesses.

My father had most of his stomach removed in the 1980s, had a bowel cancer operation in the early 1990s, his lungs were fag fucked with emphysema, but he still had a fairly good life up until 2000.

In the mid-90s he was given a choice of having chemotherapy which would give him a 60% chance of not dying of cancer, or doing nothing and lowering his chances to 40%. He chose not to have chemo because he didn’t want to suffer through the treatment with a close to 50/50 chance it wouldn’t save him anyway. But this was his choice, and I think a sensible one.

If a Covid-like virus had hot the country then and I was given a choice of saving my business (I was a sole trader than) or saving his life I would have chosen his life. I had already changed jobs and moved so I could support him as his health problems increased (just after he had a mild stroke).

I’m sure there are many people who would put people before money in this way.

I think it would be terrible to let Covid-19 spread freely in New Zealand to try to reduce the impact on business and the economy.

I also think it would be misguided. If we didn’t have a lockdown and Covid-19 ran rampant here, as it almost certainly would, there would likely be hundreds if not thousands of deaths and many more hospitalisations. That in itself would be expensive.

If our hospitals were swamped with Covid cases – I presume no one things they should be left to suffer and die untreated – it would increase deaths by other causes because of lack of resources and treatment.

And if New Zealand was ravaged by Covid-19 there is no chance of tourism  recovering, no one would want to come here. New Zealanders would be banned from travelling to many countries. It’s likely exports would also be affected, air and sea transport would be badly compromised, and New Zealand would be an unpopular source of goods.

Internally if the virus was uncontrolled it would also have a major impact on travel and business. Many people would willingly keep away from places and businesses that were a risk to their health and life.

The main difference would not be economic impact, it would be whether the economic and employment was in a well controlled situation or chaotic and uncontrolled.

It’s debatable (and impossible to know) which would be economically worse, doing a lot to limit Covid-19 as we are, or doing much less or nothing.

Regardless of the economic factors and effects, we can’t just treat the elderly and the ill as expendable to try to save a few jobs and possibly (but probably not) keep the economy healthy.

“But the flu’ is trotted out by Trump and some here – but we have a choice of vaccinating against the flu and minimising our risks. We can’t do that with Covid. And because we could potentially die of something else, the flu (more often of complications), of cancer, of heart disease, is a very poor reason to not protect against a new threat.

If I was in a decision making position I certainly would put the health of citizens – especially the old and the ill – ahead of the economy. I back and applaud our Government and unanimous Parliament doing this.

No matter what the financial impact of Covid-19 measures, businesses will survive, new businesses will fill gaps, the economy will recover.

No one recovers from death.

 

Recession imminent? Economic indicators to watch this year

The world is overdue a recession, or worse. US sharemarkets ended the year dropping a lot from earlier record highs and then recovering a bit, but still well off the highs. So what is likely to happen this year?

Reuters: Breakingviews – Three key indicators to watch like a hawk in 2019

Want to know whether there’s going to be a U.S. recession, a flare-up in the trade war, or a spate of corporate implosions?

…just stay focused on these three proxy indicators.

Soybeans. American farmers have been early victims of the escalating response to President Donald Trump’s import levies. When crops from other countries like Brazil are relatively more valuable, it suggests traders are more worried tariff barriers will persist.

U.S. yield curve. Different experts pick different comparisons, but in the past when the yield on 10-year Treasury bonds has dipped below the return on two-year government paper, a recession has followed. As 2018 draws to a close, the gap is once again very thin.

Corporate health. One hint at sentiment comes from indexes that track how many stocks in given markets are in bear territory, meaning they have fallen 20 percent or more in value from their peak prices in the last 12 months. About half are in that zone in developed markets and more in emerging economies. That might mean shares are cheap. Or it might signify negative sentiment and an accelerating slide in 2019.

This is very US-centric, but the health of the US economy has a major effect on the rest of the world, including us.

It is difficult to predict when recessions will occur, but one near certainty is that they will keep occurring. The world is overdue from an economic setback.

The New Zealand economy is in good shape, but can be easily impacted by overseas markets.

Fortunately Minister of Finance Grant Robertson took a prudent approach to his first budget in 2018. However there is pressure on the Government to deliver on it’s social promises – or at least on expectations on what a kinder more progressive government should be doing.

The best time for significant tax and social reform is when there is money available to do it, like now when our books are in surplus.

If major measures are not put in place before the next recession it will get a lot harder.

And back to the US – tax changes there have substantially increased US debt, so they are not in a good position to weather a recession. This could make an economic hiccup worse.

‘Green’ carbon-neutral transition investment fund launched

A $100 million fund has been launched to promote growth in low-carbon business to help “transition to a clean, green, carbon-neutral New Zealand”.  It is called New Zealand Green Investment Finance Ltd so the Greens get to promote their name along with the business orientated fund.

This has come from the Labour-Green Confidence & Supply Agreement, which included:

4. Stimulate up to $1 billion of new investment in low carbon industries by 2020, kick-started by a Government-backed Green Investment Fund of $100 million.

It is a one-off sum that is intended to “operate independently from Government and work in a market responsive and commercially focused way” in contrast to NZ First’s much larger $1 billion per year Provincial Growth Fund that Shane Jones keeps dishing out as he promotes himself as a champion of the provinces.

It is a sizeable amount of money, but is probably a worthwhile trial to see if James Shaw’s aim of a establishing a ‘green’ economy.

Jacinda Ardern, James Shaw: $100 million investment fund launched to invest in reducing emissions

Business and the Government will jointly tackle climate change with the launch of New Zealand Green Investment Finance Ltd; a $100 million fund to reduce New Zealand’s greenhouse gas emissions, Prime Minister, Jacinda Ardern, and Climate Change Minister, James Shaw, announced today.

The fund is a central plank in the Government’s plan to transition to a clean, green, carbon-neutral New Zealand and it delivers on a Green Party Confidence and Supply Agreement commitment.

“Tackling climate change is a priority for this Government and business involvement is crucial to our success. No one can opt out of the impacts of climate change. This fund helps business to opt in to the solution,” Jacinda Arden said.

“Lowering emissions will require innovation and action from all sectors.

“This fund means the Government is bringing cash and know-how to the table to partner with business to deliver a clean, green future for everyone.

“This new investment fund is an important component of New Zealand’s plan to build a clean, sustainable, low-carbon economy that has both lower emissions and profitable enterprises,” Jacinda Ardern said.

“New Zealand Green Investment Finance will be a commercially focused investment company which will work to invest with business to reduce emissions while making a profit,” said James Shaw.

“The Government’s $100 million start-up capital injection is intended to stimulate new private sector investment in low-emissions industries; with returns over subsequent years expected to pay back the Government’s investment and see  NZ Green Investment Finance stand on its own commercial footing.

“More and more investment dollars are looking for clean, sustainable ventures to invest in. Establishing this fund positions New Zealand to attract its share of that investment capital.

“New Zealand faces a big job in upgrading our economy and infrastructure. New Zealand Green Investment Finance will help deliver financial backing to help ensure that the upgrade is fit for purpose,” Mr Shaw says.

FAQs:

What will NZ Green Investment Finance Ltd do?

NZGIF will bring financial and technical emission reduction expertise together into one organisation with the sole aim of increasing investment into low-emissions projects.

It will act as a bridge between investors and key industries and sectors, and identify low emissions projects ready for upscaling, commercialisation and use.

Why is NZ Green Investment Finance Ltd being established as an independent entity?

NZ Green Investment Finance Ltd is being established as a company under Schedule 4A of the Public Finance Act 1989 so that it can operate independently from Government and work in a market responsive and commercially focused way.

What will NZGIF finance?

NZGreen Investment Finance Ltd will have the flexibility and mandate to focus on sectors and industries where the greatest impact on emissions reductions can be made.

Potential opportunities include things like electric vehicles, manufacturing processes, energy efficient commercial buildings and low-emissions farming practices.

With New Zealand’s electricity supply already using around 85 per cent renewable sources, NZGIF will focus on tackling other sectors.  However, there may be opportunities to back smaller scale renewable energy projects; where they are smart and can contribute to making our electricity supply more sustainable as demand for electricity rises.

As a commercial entity, NZGIFwill likely focus on solutions that already exist; for example, knowledge and technology being used internationally where there is scope for use in New Zealand.

The Budget 2018 announcement referred to the NZ Green Investment Fund. Why has it changed to Green Investment Finance Ltd?

Use of the word ‘Finance’ is a more accurate reflection of the purpose and market-leading role NZGIF will play.

Why isn’t the private sector financing these sorts of investments?

New investment markets take time to develop and investors rely on good information to assess viability and risk.

They also need financial products which are structured in a way that fits the market.

As a result, there is limited activity initiating and funding low emissions or ‘green’ investment deals here.

The establishment of NZ Green Investment Finance Limited, which will focus on accelerating private sector investment into emissions lowering projects, will fill this gap.

More details about NZ Green Investment Finance Ltd are available here.

The government funded company may take a few years to prove if there is good business in low-carbon initiatives.