The Situation
Humanity is being ravaged by a virus with (1) high transmissibility and (2) high mortality. Everything is in flux. It is
difficult to estimate either (1) or (2) because we don’t know how many people have it. However, some estimates have
mortality at 4 per cent and half the population being infected, so 2 per cent or 100,000 deaths in New Zealand.What Happens Next?
New Zealand can either (1) hope the virus doesn’t get here or doesn’t spread or, conversely, (2) wait until most of the
population has had it so the virus can’t find enough carriers to survive in our population (herd immunity), or (3) wait
for a vaccine to achieve herd immunity that way. A vaccine is a year away and (1) seems implausible so either way we are
stuck with (2).Flattening The Curve
For context, usually only 30,000 people die in New Zealand each year. If there were to be 100,000 deaths in a few months
we would face the kinds of scenes being played out in Italy. Doctors and nurses having to make ethical decisions about
who to treat that we usually only read about in stage 1 university ethics classes. Crematoriums working 24 hours a day
because there are simply too many bodies.Can The Election Be Delayed?
The short answer is that the election could easily be delayed as late as December 12 simply by the Prime Minister
deciding to do so. Her announcement of September 19 earlier this year is in no way binding. To delay later than that
would require a 75 per cent majority in Parliament. At this stage we believe it is unlikely.Shutting Down Tourism
The Government has effectively shut down tourism by requiring new arrivals to self-isolate for 14 days. It is likely
this will decimate flight schedules into New Zealand and goods will become more expensive if the cost of flying here is
not offset by carrying passengers on the top deck. The hope is that doing so will help flatten the curve. We are dubious
that closing the border now will have much effect. We suspect it is too late for keeping the virus out and has been for
two weeks, but the Government has a massive information advantage.The Role Of Government
People like to say ‘the Prime Minister is running the country.’ She’s not, and no Prime Minister ever has. The Prime
Minister is responsible for government. New Zealand is a conglomerate of many institutions. Government has a role to
play but so does business and civil society in facing this challenge. A crisis is a reason for government to do its job
efficiently, not an excuse for it to expand.Shock And Orr
As is his wont, Adrian Orr said there would be no monetary policy solution until March 25, then made a surprise
announcement of a 75 basis point, and 75 per cent, OCR cut this morning. The big question is where he goes after this.
In total, the OCR has now been cut from 1.5 to 0.25 in less than six months. There is no room left except for
unconventional monetary policy. Importantly, he also announced the Reserve Bank’s capital requirement increase would be
delayed by 12 months. This is a good template for all regulatory initiatives.Stimulus Is Needed… But
The Government will no doubt announce today that you are getting your future earnings early. It will give cash to
workers and businesses that taxpayers will have to pay back later. The Government may well be the right institution to
do this. Many households and businesses will have no other facility for maintaining cashflow. Widespread bankruptcy
could lead to a widespread breakdown in social order. However, stimulus should be done by reducing taxes and delaying
the due date wherever possible, not keeping tax the same and spraying money around. First, do no harm.Follow Adrian Orr’s Example (Really)
However, it should also announce a one year moratorium on new regulations that are not related to fighting COVID-19. For
instance, it should delay the proposed minimum wage increase scheduled for April 1 by a year. Similarly, regulations
intended for landlords, employment law, and anything else likely to put costs onto businesses should be canned for the
foreseeable future.What About Testing?
There are widespread reports about the rationing of testing. The Government will not allow testing if a person has
symptoms, only if they can show they’ve been in contact with someone who has the virus. We believe the Government needs
to be more upfront about why testing is being rationed, and whether it is preparing to increase the capacity for testing
more people. As a result of limited testing, we may have a very limited picture of how many New Zealanders really are
infected.Democracy Dies In Darkness
Policy debates of critical importance are being overshadowed by the virus. Only a few weeks ago, one of the most
important policy proposals was the Government’s idea of radically paring back the number of subjects and the amount of
content taught in the NCEA. Given our falling performance in international comparisons of students already, teaching
them even less would be a disaster. The Government must not take this opportunity to quietly progress its
non-coronavirus agenda.We Will Prevail
The situation is going to get a lot worse before it gets better. We are a prosperous and free society. Our community
famously looks out for its members in difficult times. We are resourceful and innovative. We have no doubt that New
Zealand will emerge from this crisis as a stronger society.