Recent reported comments by some economists that New Zealand's lockdown was excessive and 'with the benefits of hindsight' caused unnecessary economic pain, demand a response.
The comments are misplaced. They appear to be one strain of a general narrative that the Covid-19 pandemic is not as bad as many governments have portrayed. And that with better economic nous New Zealand could have still escaped the health impacts but at much less cost to the economy.
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As always, it is best to consider the evidence to hand before reaching firm conclusions. That highlights an important point – the evidence is still coming in, and the economic effects and the social effects of Covid-19 are not yet known.
A focus on short term economic impacts – based on understanding of the economy as it was rather than what it will evolve to be - is not an adequate basis for claiming we did not need such a stringent lockdown.
It is not especially useful to conflate the epidemiological with the economic unless those interrelationships are fully understood.
Let's look at what the data tells us.
First, how does our lockdown compare with other nations. It is important to consider both how strongly we locked down, and for how long. We seem to do quite well on that score.
There is considerable focus on the mobility of populations as a broad indicator of societal and economic interaction under various levels of response. Data on community mobility shows the reduction in mobility in the three months March 1-May 31 when most responses were in place.
The graph of mobility outcomes for 48 countries shows that New Zealand has done relatively well – while our lockdown was relatively deep but it was short, with mobility down by almost half over the period.
In terms of response New Zealand sits around the middle of the pack, so the concept that New Zealand over-reacted to Covid19 is not borne out by the evidence.
And this is only the story so far, showing the response to the first wave. Many countries are gearing up for the second wave, especially those with still high incidence of Covid-19 in the community. While many countries are removing official restrictions, it is likely that the mobility in some countries will remain low with the public choosing to continue social distancing.
Second, the health safety of the environment in which we are now looking to revive the economy is obviously much better than in many countries around the world. This relates primarily to the threat of Covid-19, and its continuing presence among the population and the chances of contracting it. That has a massive effect on New Zealanders' confidence to interact with other people, in both the workplace, and when we consume goods and services.
The second graph shows the implicit threat in the estimated incidence of Covid-19 in the population. New Zealand is compared with a selected range of other countries which are also re-opening their economies.
In the USA, some states are re-opening when their incidence is still high and in several states is still rising, potentially compounding their first wave with a second.
The New Zealand community's confidence has flowed through very quickly in our consumption response – as shown by the high volume of retail sales in the first week of Level 2, overall at close to the same time last year, and by the reported high volumes of domestic holiday travel over the Queens Birthday weekend.
The ASB also notes "This quick recovery in spending, coupled with a turning point in both business and consumer sentiment, is certainly a positive development."
The contrast with some other re-opening countries is stark. Research into consumer spending shows that in Sweden which has had no government lockdown, spending dropped by around 25 per cent, only slightly less than Denmark – which applied lockdown from mid-March – where the drop was 29 per cent.
The conclusion is that "most of the economic contraction is caused by the virus itself and occurs regardless of whether governments mandate social distancing or not".
Figures from Germany show that in the first week of re-opening retail sales were "..down by over -90 per cent, but have since "recovered" to -75 per cent...", while one retailer found that across Austria, Denmark, Sweden and Germany footfall was "down initially by -70 per cent before improving to -30per cent".
The research also cited consumer reluctance to return to public spaces especially retail stores.
This is clear indication that Covid-19 per se has been the dominant driver of lockdowns, and consequent economic impacts, whether informally via loss of community confidence or formally via government controls. Governments have chosen to manage that lockdown in different ways, with very different levels of effectiveness and success. Hence the importance of not conflating the economic and the epidemiological.
Community confidence, and strong sense of unity, are having a major positive impact, which points to our economic recovery starting quicker than countries where health impacts were not managed as well, and there is still considerable fear across the community of the health risk.
So – how is the score card? On the cost side: we went hard and we went early. There was substantial immediate impact on economic activity, and on the spread of the virus. On the benefit side: our lockdown was relatively short and we will rebound relatively quickly. Our good health security and few deaths means we have faced a much lower health cost, and has given the community and business sector higher confidence to get running again.
Most important, New Zealand is in the position of re-opening because it is relatively safe to do so. We are not in the awful situation where many countries now find themselves of knowing that re-opening is very likely to generate another wave, but being forced to do so because the pressure on their economies is too much to bear.
We have avoided that by understanding that the impact on health would dictate the impact on the economy, and hence paying attention to the relevant science. And when over the next 12-18 months, other countries count the economic cost of the first wave plus the second wave and maybe a third wave, New Zealand is likely to stand out as a country that suffered only one wave and was able to recover relatively quickly.
So, according to the evidence the lockdown in New Zealand was strong but not "more stringent" or "particularly harsh" compared with many other countries. By deciding quickly to opt for a short, sharp, early shock, we seem to now be rebounding more quickly and comfortably than many other countries.
Hindsight is not showing us that we did not need to go so hard. It is showing us that we did need to go hard. Because by doing so we avoided the massive impacts seen on many other communities.
There is no evidence that New Zealand's strong lockdown was unwarranted. This is not some lucky escape. It was a careful strategy, based on strong science and sound understanding of the economics of a pandemic.
• Douglas Fairgray is a director, and Rodney Yeoman an associate director, of Takapuna-based consultancy Market Economics Ltd.
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