PM Jacinda Ardern comments on a potential South Island move to Level 1. Video / Mark Mitchell
COMMENT
Is this what it feels like to pivot? The Government's articulated strategy remains the elimination of Covid-19, but there now appears to be a limit to the lengths to which it will go to achieve that.
Auckland (representing a third of the population) left Lockdownland on Monday despite continued,though apparently low level, "community transmission" of the resurgent virus. It was an admission that lockdown is a blunt instrument that clobbers the economy; we cannot use it repeatedly despite its purported public health benefits.
Prime Minister Jacinda Ardern says we can still move up levels, but it seems unlikely that level 3 and certainly level 4 will be visited again on such a wide swath of New Zealanders.
On Monday morning, Auckland moved from level 3 lockdown to a loosened alert level, dubbed 2.5. Level 2 continues in the rest of the country. The move requires beefed up provisions like mask-wearing on public transport but employees can go to work and, even more importantly, all children go to school.
The move came despite the Ministry of Health's favoured epidemiological advisers counselling more caution and a longer lockdown.
The emerging gap between government policy and such health advice shines much needed light on the Prime Minister's insistence that the best economic response is a strong public health response. It was never anything more than a bromide. The real question is how to balance those two, often competing, demands.
It appears the Government is beginning to feel that lockdowns get the balance wrong. While it is hopeful that other measures, like masks and contact tracing, can finish the elimination job this time, there is also a greater acceptance of risk.
The strongest evidence of the shift came last week from Grant Robertson, the Finance Minister. First, in his refusal to extend the wage subsidy for the final days of the Auckland lockdown, and then when he sounded a note of fiscal caution that we have scarcely heard since the beginning of the year. "Every penny we're spending" he said in his explanation for not prolonging the subsidy, "is borrowed money".
Finance Minister Grant Robertson announces the wage subsidy scheme extension. Photo / Mark Mitchell
Robertson has been enormously wary of formal analysis that weighs the costs and benefits of policies to fight the pandemic. But even without such formal calculations, the cost of strict lockdown measures loom very large.
On one hand, the wage subsidies (there have been three iterations) appear to have been effective in keeping employees in their jobs through these short-term shocks. The programme pays the full-time workers of sufficiently affected organisations close to $600 per week, while part-timers get $350 a week. The self-employed are also covered. Lockdowns would otherwise produce a wave of redundancies as shuttered businesses and other organisations are unable to pay their staff.
But like the lockdowns New Zealand has endured, both through level 4 and level 3, the subsidy is a very blunt instrument. In a labour market of 2.6 million jobs, Treasury figures show that the programme has supported more than 1.7 million jobs, well over half the working population.
The bill is a staggering $13.5 billion, the single largest chunk of the $62b the Government earmarked in March and April for Covid-related response and recovery. And the subsidy, in its various forms, has only been running for five months. For some perspective, that represents about two thirds of the full-year $20b health budget.
Auckland returned to level 2 on Monday. Photo / Grew Bowker
Such programmes are for emergencies and have to end as Robertson has now signalled (the deadline for new applications is September 1, though payouts will last well beyond that). Without such systematic support for jobs it would be nearly impossible to shutter businesses in a wholesale fashion again.
Beyond the whopping expense, there are other reasons Robertson is keen to move on from wage subsidies, at least in their current broad and untargeted form.
Ending the subsidy is the clearest way the Finance Minister has of signalling that we're moving into the revitalising and rebuild phase of the Covid response that he promised in his May budget.
Of course, the extent to which any amount of government spending can actually revitalise and rebuild the economy is likely quite limited. Policy and regulatory settings (for example, at the border) may be as important as any direct fiscal stimulus we slosh about. And the effect of the global recession, the brunt of which is still to come, will matter enormously too.
Not that official "messaging" will spell much of this out. But it's worth remembering that the Government is doing two things at once. It is acting. And it is telling the story of its actions; changing course isn't something it's keen to talk about.
