Sir John Key is warning that the economic crisis as a consequence of Covid-19 will be far worse than the health crisis.
“We are in the very early part of what is going to be a very significant contraction of the economy here in New Zealand and globally,” Key said.
The former National Party leader and three-term prime minister said consumer confidence and buoyant equity and property markets were being propped up by low interest rates and were not a true reflection of the real economy.
“Don’t underestimate how weak some parts of the sector are.”
The wage subsidy is also masking potential business failures and unemployment.
Key, who is chairman of ANZ bank, said that in New Zealand about a quarter of all its customers had experienced a 20 per cent or more reduction in their income due to Covid-19.
About 10 per cent had their income reduce to zero, he said. . .
Some people who have lost jobs have found others paying a lot less, some are working more than one part-time job for poorer pay and some have not been able to find new jobs.
Treasury and the Reserve Bank should be more involved in day-to-day conversations around the Covid-19 response in the same way the Ministry of Health held daily briefings, he said.
New Zealand needed to do everything it could to prevent community transmission but that did not mean the borders needed to be closed to everyone except returning New Zealanders, he said.
“I am not advocating that we recklessly open the borders and allow people in. That would be crazy for our economy.”
But New Zealand could do a lot more by quarantining on a much larger scale, he said.
Covid-19 must be kept at the border but that doesn’t mean that we can’t let more people in it means looking at ways to let them in safely.
This could include much cheaper options than the flash hotels that are currently being used.
It is possible there are disused buildings that could be repurposed and how hard would it be to locate purpose-built prefabs somewhere secure? The military should be able to advise on this.
The government threw all it could at the potential health crisis, it has failed to put nearly enough attention and resources into minimising the economic crisis .
That failure will lead to a different health crisis – increases in stress related illnesses, alcohol and drug dependency and other conditions exacerbated by poverty and unemployment. It will also result in less money to fund health services and that will lead to delays in diagnosis and treatments that will affect quality of life, ability to work and reduced life expectancy.
The government told us it took battling Covid-19 so seriously, not just to prevent a health crisis but failing to deal with it would have a disastrous economic impact.
It must now take an equally serious approach to the looming economic crisis to stave off the health crisis that will result if it doesn’t.