Covid 19 coronavirus: Pattrick Smellie - Now comes the hard part

COMMENT:

It's barely a fortnight since the Government decided to stop fiddling and got out the heavy artillery on the Covid-19 crisis. It seems so much longer.

Even a week ago, there was no national alert-level system.

Today, all but perhaps 15 per cent of the workforce – a combination of essential services and export and food industries with dispensations – is confined to barracks.

The blistering pace of this change from what used to be normal life is bewildering, worrying, and almost like a state of grief.

Anger, denial, depression, bargaining and acceptance are the five stages of grief. We are all going through them.

Every New Zealander this weekend is reconsidering what the next five years looks like. Is my house worth what it was? Will I still have a job in six months? What just happened to my KiwiSaver and should I do anything about it? How is grandpa faring on his own? Will my business survive? What happens if I get the virus? Will my housebound neighbour please stop using the bandsaw?

Does anyone really know how to get out of this?

That last question is the one that weighs most heavily on Government ministers at the centre of this storm.

And after a fortnight of massive fiscal, health and national emergency announcements, they are as tired and shell-shocked as anyone, albeit buoyed for now by the fact that opinion polls show almost total public support for what has been done so far.

As a small, relatively cohesive nation, New Zealanders are mainly showing their best side so far: pulling together and recognising that only collective effort and obedience will make the lockdown successful.

To that extent, there is acceptance.

The problem for the Government is that it won't last. Anger, depression, denial and bargaining are all still waiting in the wings.

Just ask any Cantabrian who lived through the earthquakes, or any member of the John Key administration who responded to them.

All of Government Controller John Ombler during his media update on Covid-19 national response, on day 3 of the Covid-19 lockdown. Photo / NZ Herald

The adrenalin rush of massive early announcements is all but over.

Now comes the hard grind of executing a strategy that is unavoidably experimental, likely to be error-prone, will inevitably disappoint some if not many, and in which the Government must never look as if politics rather than the very real issues are driving it.

That is all the harder with Covid-19 because of the contradiction at the heart of its two-pronged health and economic challenge.

That is: the harder the Government goes to meet the health challenge, the greater the damage it does to the economy. It has turned the monetary and fiscal taps on as hard as any New Zealand government has ever done to try to meet the economic part of that equation as it tries the only credible option for slowing the spread of the virus. But even a firehose has a maximum pressure limit.

Already, the knotty, complex and practical issues thrown up by such policy upheaval are starting to emerge.

For a start, the private sector can't keep up with the cracking pace of change set by the Government. In large part, that is because the rules are fluid, but even more so because businesses can't or won't accept the same financial risks that a government can bear.

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While business owners have been gob-smacked to receive tens of thousands of dollars in wage subsidies in their bank accounts within hours of application, that compensation covers 12 weeks. It is a stopgap and already the anecdotes about fraud and bad faith towards employees the scheme should cover are emerging.

The subsidy scheme is part of the more than $20 billion of Government funding and loan guarantees that Finance Minister Grant Robertson has made available in the last two weeks and there is more to come. For example, we have yet to see the deal for "large, complex businesses."

There are pleas from commercial property landlords as they face demands from tenants for rent relief and KiwiSaver providers want the rules relaxed to let account-holders access funds if they claim hardship.

Meanwhile, the Government-backed emergency business lending packages announced last week are still without detail.

Robertson was expecting the trading banks to announce how they will administer this and the mortgage repayment holiday initiatives on Thursday evening.

But the New Zealand Bankers Association was telling journalists the banks are still "working through the details and should be able to announce in the next few days". Bare details of the mortgage holiday scheme arrived on Friday afternoon.

Not to put too fine a point on it, while the trading banks are being urged to step up to the plate and support New Zealand households and businesses, they are still businesses themselves.

The 80 per cent Government guarantee on $6.25 billion of three-year loans to "viable" businesses and the official encouragement by the Reserve Bank to lend in a more lenient fashion than usual are all very well.

But the banks are not just going to step into the void. As a result, they risk becoming very quickly the butt of business and home owners' anger, though they know they will get that no matter what they do.

Just wait for the outcry from renters if they don't start getting relief from residential landlords, whose eligibility for the mortgage repayment holiday is not yet even confirmed.

Likewise for the emergency business lending scheme. The Government is choosing to do almost no due diligence on wage subsidy scheme applications in order simply to flood the economy with cash and give a dose of confidence.

But banks will resist a blanket charity approach to businesses that were already struggling before Covid-19.

Despite becoming far better at holding hands with financially stressed customers over the last two decades, banks are facing financial distress on a historic scale at the same time as being urged to throw out their current credit criteria.

You just know that's going to be worrying boards of directors and the legal department, quite apart from CEOs and chief financial officers.

If the banks end up taking political heat early, it won't bother the Government.

It needs all the cover and time it can get now to prepare for the coming maw of complex, urgent, granular decisions that the first wave of big decisions will produce.

Firstly, there is the challenge to the public servants. Their unenviable task is not only to move mountains and fashion instant policy responses to unique circumstances. They are also charged with being bearers of bad news.

Right now, the last thing Prime Minister Jacinda Ardern wants is to front her daily afternoon press conference armed with some apocalyptic disclosure from the Ministry of Health about the absence of protective equipment for, say, social workers or carers for the disabled, who are still going to work in the community every day.

Behind the scenes, the Government right now will be getting to grips with a decision-making framework that allows it somehow to weigh the competing health and economic alternatives it faces.

• Covid19.govt.nz: The Government's official Covid-19 advisory website

It will be testing who in the Government is able to make hard decisions fast. Under National, it was Gerry Brownlee's combination of an ability to listen while being screamed at and make decisions that firstly helped the Government move fast in Christchurch. He just accepted that many would hate him for it.

Robertson is probably going to carry that can, and it will be doubly freighted with the fact that the left-wing in his Government already sees opportunity for a progressive political revolution by stealth. The $25 permanent increase in benefit payments is a win for the left as well as a necessary and justified move.

Less obvious is whether the Government should be trying to cobble a Universal Basic Income together at this time.

The Government will also need to work out how and who to listen to, including being able to hear those who shout at it most angrily.

And finally, it can never afford to look as if it is trying to win an election with its response to this huge challenge.

At this stage, the response can be summed up as: a Government debt blow-out is socially more acceptable than an unemployment blow-out or a health system so overwhelmed that people die in large numbers from the virus.

And no one can reasonably be expected to know exactly where those chips will land.