Covid 19 coronavirus Delta outbreak: Liam Dann - NZ economy can survive lengthy lockdown

Economic shutdown: Construction work has stopped under level 4 lockdown. Photo / Michael Craig

EDITORIAL:

New Zealand's economy can survive a lengthy lockdown.

The strength of our pandemic response in the past year has meant borrowing far less than originally planned.

Expectations of $50 billion in new borrowing — or the $100 billion the Reserve Bank provisioned for in its bond-buying programme — were never realised.

The Government still has several billion dollars it can deploy without changing the nation's debt track, as it was forecast in the May Budget.

And if things were to get much worse then we can take heart that the nation has capacity to borrow much more than that.

Our current public debt to GDP ratio of about 34 per cent makes us one of the least indebted nations in the world.

Compare that to a ratio of 235 per cent in Japan, 100 per cent in the UK or almost 50 per cent in Australia.

Yesterday the Reserve Bank reflected that confidence in its view that the long-term risks for this economy still lie with inflation and an capacity constraints on growth.

It still plans to raise interest rates. We should be encouraged by this.

This is a macro-economic view of course.

For those anxiously awaiting the results of Covid tests or struggling to work out how to keep their business afloat, it may be cold comfort.

The events of the past few days have been mentally challenging for everyone. For many, this lockdown feels tougher than any we have faced so far.

In reality, we are in a stronger position than we were early last year.

There is a vaccine.

It works.

And although we are about three months shy of where we'd like to be with the rollout, it is still on the horizon.

In March last year we did not have that comfort.

Back then we didn't know the extent to which the domestic economy could cope with closed borders.

We didn't know how strong the post-lockdown rebound would be.

We didn't know that much of the lost economic output was only being temporarily displaced.

We didn't know how well we could transact business at alert levels 2 and 3.

We didn't know how well policies like the wage subsidy scheme would work.

It is somewhat inevitable that this time feels tougher.

Our collective psyche is battered and bruised from 18 months of pandemic uncertainty.

Our brains are hard-wired to crave predictability.

Science has taught us that we create internal narratives to cope the uncertainty of the world — even in the best of times.

It is important we keep those narratives grounded in reality so we don't head off down the rabbit hole of the anti-vaxxers and Covid-deniers.

But we also need to maintain a sense of optimism, something every armchair sports psychologist would understand.

Achieving goals — whether that's an winning an Olympic medal, saving for a house or getting through a lockdown — requires some degree of positivity.

It's a tough balancing act right now. But it's one of the few things we have control over in the next few weeks.

That, and how we behave.

Stay in your bubble, wear your mask, get tested.

Stay safe.