Covid 19 coronavirus: Pattrick Smellie: Hooray for level 1. Now what?

The outlook for tourism is tougher. Photo / Brett Phibbs

COMMENT:

Faced with catastrophic risk, humans react with two visceral emotions: dread and outrage.

For the past three months in New Zealand, Covid-19 has produced both in ample measure, and on two fronts that have often been seen as diametrically opposed.

There has been dread about the health impact of the virus and outrage, particularly in the earlier phases of the lockdown, at any perceived breaching of the rules of physical isolation and travel restrictions.

Adults over 50, accustomed to bending the rules to suit themselves, found to their surprise that younger generations were far from tolerant of casual disregard for those rules, especially where the young perceived their economic sacrifice was mainly in service to the health needs of the old.

Equally, there has been dread about the economic impact of the response to Covid-19 on our economy, and a mounting sense of outrage – at times stoked for political advantage – among a growing proportion of the population who feel the country has moved too slowly to 'unlock'.

The argument that a faster unlocking might risk a longer economic recovery has been heard, but very often not accepted.

A brief sigh of relief

Today's announcement about a move to alert level 1 – otherwise known as 'life as normal, but with hard borders' – marks the end of this contest between urgent public health and urgent economic priorities.

Most New Zealanders will allow themselves a sigh of relief about that - and a sense of national congratulation.

Those who remain sceptical of the alternatives need only watch any international news channel tonight to appreciate the relative safety that the elimination strategy has produced for New Zealanders.

Prime Minister Jacinda Ardern today announced the country would be moving into level 1. Photo / Mark Mitchell

However, relief and optimism will fade as focus turns away from the public health threat and squarely onto the economy.

A fragile consensus is emerging that the recession caused by Covid-19 may be less severe than previously forecast.

Bank of New Zealand economists today said they believe the level 1 announcement will "provide the economy a significant boost," simply by lifting spirits among businesses and households. At level 4, an estimated 37 per cent of normal economic activity was halted. At level 1, that estimate is just 3.8 per cent.

Jobs vulnerable

However, thousands of people are still learning each week that they don't have a job anymore. This month, BNZ calculates, some 700,000 people will be vulnerable as their employers lose access to the wage subsidy, which has cushioned the economic blow so far.

In addition, businesses will inevitably be looking to restructure their operations to survive with fewer staff.

"Even if activity levels returned to 'normal' they would do so with a lower demand for labour," wrote BNZ's head of research, Stephen Toplis. "More than anything else, it is this that drives our view the unemployment rate will continue to rise to double-digit levels and will take much longer to decline than it did to rise."

Problematically, there is also still one potent avenue for the expression of health-related fear and anger: at the border.

The potential for outrage to erupt over relaxed border restrictions for various classes of essential workers has already been seen. The permission given for American film workers required in Wellington for the 'Avatar' sequel engendered deep cynicism and displeasure.

That reaction was partly driven by health concerns and partly by short-sighted and parochial concerns - why favour foreigners when locals are losing their businesses?

Unhelpful

This is extremely unhelpful for other sectors of the economy that still need large numbers of migrant workers or, in the case of international education, foreign students, to be allowed either to come or to stay here.

The dairy sector, for example, goes into calving season next month followed by the spring 'flush' around September, when some 3,000 temporary migrant work visa holders are due to go home. In March next year, another 2,000 are due to leave. Ministers rather than bureaucrats hold all the cards here, but decisions are slow in coming.

New Zealand First is commonly blamed, seeing political advantage in arguing that jobs should first be for New Zealanders.

However, while the Ministry of Primary Industries is funding a huge push to get suddenly unemployed locals trained and into dairy work, they will not be available in time or sufficient numbers to ensure the dairy sector maximises production in the season ahead. Unnecessary further economic sacrifice could follow.

Similar problems exist across the primary sector and involve skills ranging from beekeeping to viticulture.

Tourism knife-edge

The outlook for tourism is tougher. While a migrant worker or international student may be willing to spend a fortnight in isolation before starting work or study here, the same can't be said of short term holiday-makers.

The transtasman bubble and a willingness by well-off Kiwis to take extra holidays at home are their best hope for the foreseeable future.

Many will abandon an industry that may never return to the 'bums-on-seats' low-value proposition that drove so much of the New Zealand tourism sector before lockdown.

However, bar-owners, restaurants, shopping malls, cinemas, and airlines that can sit people next to one another again, and all manner of other businesses, will see something like a return to normal from tomorrow.

And for every central city snack bar, starved of custom while thousands of workers kept working from home through levels 3 and 2, the next few weeks should be like manna from heaven. Many will work at least some of the time at home from now on, but life that's been returning to urban areas will intensify. Who knew we would miss traffic jams?

Counting the cost

As the dust settles and memory fades from the lockdown, there will inevitably and should be inquiries into how New Zealand managed this extraordinary period.

The health system's capacity to respond to a nationwide epidemic was ragged in places, routinely uncoordinated, was under-prepared and with ageing stocks of emergency supplies.

There will be charges, justified at one level, ridiculous at another since there was arguably little choice and the Crown accounts were strong, that the government has effectively bought the 2020 election by committing the largest spend-up of borrowed money in the country's history.

We will never know what infection rates would have been like had we simply stayed at level 3 rather than gone to full lockdown, but the design and execution of such a national lockdown in the future must be informed by the lessons to be learnt from the scramble this time. New Zealand policymakers have a tendency not to engage in rigorous review. That can't be allowed to happen this time.

In other words, there is still a very long way to go to repair an economy knocked flat by a global pandemic and caution is warranted at the same time as any collective national self-congratulation.

But for this moment, let's at least acknowledge that compared to almost anywhere else you care to look, New Zealand has emerged earlier and as fit as any other nation to face the challenge ahead.