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COVID-19 has turned the world economy on its head, with country after country locked in an attempt to curb the disease. As of Monday morning (New Zealand time), it had killed more than 288,000 people, including 21 kiwis.
New Zealand’s economy has suffered a massive blow due to our blockade and closed borders. Businesses can open on Thursday when New Zealand goes to Alert Level 2 and various restrictions are eased.
“The answer must be based on microeconomics, not just around massive spending,” said economist Cameron Bagrie. “The temptation will be to ‘think big’ instead of small and throw money like confetti.
“I’m going to see if we can turbo charge what I call those ‘little things.’ Little things are things that we overlook but are quite critical.”
So far, the Government has spent more than $ 10 billion to boost the economy. Ahead of Thursday’s budget announcement, Bagrie told the Epidemic Response Committee that New Zealand is likely to take a hit of $ 3 billion each month, even at alert level one.
“We have been told that the borders will increase for a long time, so the $ 3b per month will accumulate,” he said Wednesday.
“Their [the Budget] going to be critical about detailing a plan or some hope for the future. Hope is not a strategy, but New Zealand will need something.
“The focus will be on health and the extent of support packages, but the numbers will be absolutely dire; deficits over $ 30b next year, government debt issuance of over $ 40b next year. I think debt government net is going to exceed $ 180b at the end of the projection period. “
Another sector earmarked for Budget support is the shrinking tourism industry, which in fact does not exist in an era of closed borders. Tourism Minister Kelvin Davis confirmed Tuesday that there would be a “response and recovery package.”
Tour operators have called for a “bubble” in the South Pacific rather than having to rely on the domestic market, some of which will be possible under alert level 2. Prime Ministers Jacinda Ardern and Australian Scott Morrison have discussed a bubble trans-Tasman: work for which is already underway.
Bagrie said changing school vacation periods for different regions to ensure there isn’t just a spike in the July vacation could be an option.
“Don’t just think big, think small to stay upright.”
He said he expects the Budget to show that New Zealand is ready to make some “tough decisions.”
“That includes prioritizing spending, and some sacred cows must be put on the table,” Bagrie said, reiterating a point he made in an interview with The AM Show on Monday. One of those sacred cows was retirement age, he said.
“KiwiBuild: that money needs [to be] redirected to Housing New Zealand. I want to see signs that it will be a pragmatic and economic plan instead of an ideological one. “
And while New Zealand aspires to reach alert level one, Bagrie said other challenges cannot be “sugar coated.”
“Technically, we are turning the corner and things are looking better. One of the most important things I’m seeing is, ‘How fast will it be or will it bring the economy back to the levels we experienced before COVID?’ And I think the answer to that is “an incredibly long time.”
