Surviving the Crisis

Donald Trump may choose to see the coronavirus scare as a “hoax” perpetrated by his political opponents, but the rest of us are unlikely to derive much comfort from such egocentricity and self-delusion.

It can come as no surprise that New Zealand, like so many other countries, has succumbed to the coronavirus. It was always a forlorn hope that we could avoid the virus making an appearance in our midst; the challenge now is to avoid the fate of other countries, like France and Italy – countries with fully developed public health systems, but nevertheless struggling to contain what has rapidly become in their cases a very serious epidemic. Italy has been compelled to close the whole country down, virtually, so that nothing moves.

It remains the case that we must maintain the highest possible degree of border security (exploiting our natural advantage of having no land boundaries) and, in the case of those who have been shown to be already infected, that we track down those with whom they have been in contact, and that we insure that they self-isolate or otherwise remain in quarantine. We should also recognise that our health professionals – nurses, doctors, other hospital staff – will come under great pressure and will need as much support as possible.

So far, there is no need to panic. The measures taken so far by our government have been effective in limiting the outbreak to a small number of individuals. We are nowhere near epidemic conditions, and the emphasis remains on precautionary measures – the maintenance of basic hygiene practices, the avoidance of crowds, a recognition of those, like the elderly and unwell, who are especially likely to become ill, and to suffer the most severe consequences if they do.

Beyond that, it makes sense to stay at home as much as possible – apart, perhaps, from visits to the supermarket to build up store cupboards, though, let us be clear, the kind of panic stockpiling of tissues and sanitisers and so on that we have seen in some instances is not justified. We are fortunate in New Zealand to have domestic sources of supply, with well-established supply lines, for most of our basic necessities.

Of rather greater significance is the economic damage that we are likely to suffer in both the global and domestic economies. The fall in stock markets worldwide is an indication of the impact there will be on asset values and on our savings – and we must expect further damage to our trade and business generally.

It is at this point that government must step up to the plate. There will be no shortage of conservative voices, proclaiming that this is a time for retrenchment and belt-tightening – but that is exactly the wrong advice.

Our government, and governments around the world, now have both an opportunity and a responsibility to use their powers to make good the loss of spending power in our economy, and to lift the level of business activity as a consequence.

Although the scope for the usual stimulatory measure – cutting interest rates – is limited, the government have the possibility of borrowing further at virtually no cost, and can pump more money into the economy by using “quantitative easing”, a technique that was widely used to help out the banks following the Global Financial Crisis. The current developing crisis is no less threatening – and possibly more so – than the GFC.

A willingness to use these powers would allow the government to compensate those businesses, particularly in areas like tourism and forestry, which have been and will be hard hit by the interruptions to international trade and travel, and – further – would allow some compensation and support for those whose jobs are at risk or already suspended. Lifting the level of benefits and the minimum wage, so that the less well-off can keep house and home together, and provide a more buoyant market for small businesses would also be very helpful, not only to those directly affected, but to the economy as a whole.

Now is the time to cast political and economic dogma aside, and to do what works in the interests of all of us. We can survive the crisis largely unscathed if we all pull together.

Bryan Gould
16 March 2020