(originally published on Insight Politics March)
I’m generally quite cynical and dismissive of the media narrative by default. An unavoidable side-effect of being so absorbed in politics for the last decade. Especially reading articles about myself which get things I’ve explicitly talked about or written in press releases that mind-bogglingly appear different in print. Unsurprisingly I’ve not taken much interest in the Coronavirus until the last couple of weeks.
‘Reading between the lines’ I could see a virus with a much lower mortality rate than the flu, and those dying being virtually all elderly or suffering from other health conditions prior to infection. I wasn’t one of the panic shoppers hitting supermarkets the day after the news of the first confirmed infection in New Zealand, though I did field a few phone calls from work asking what they should do. Ring the staff who aren’t working to ask if they would like to work, I advised.
Over the nearly 22 years I’ve worked in the supermarket sector, I’ve heard it said many times, ‘you’ll always have a paycheck in that industry.’ Indeed, the altered purchasing patterns of the last few weeks have been good for business.
However, for someone who keenly follows every detail of political news closely, normal political stories have been crowded out by coverage of Covid19 and there is little else to read in the mainstream media. I’m not a home-schooled microbiologist, haven’t paid a lot of attention to the news coverage and hoped I’d just be able to do whatever it is I like to do while awaiting its inevitable end.
Last week, famous people and politicians started getting exposed to the virus, in some cases infected with it and I finally started paying attention. Then the Prime Minister let off some smoke signals last week (unvirtuous virtue-signalling – feel free to make the term viral), announcing the border would be closed to virtually the entire world excluding some Pacific Islands, with the expectation that those entering the country will immediately self-isolate for 14 days.
That struck me as a lame effort. Appearing tough (there is a voting base that likes that sort of thing), while washing their hands of actually being tough. Did she genuinely think the tens of thousands of visitors processed by our International Airports, all confined in the space of an aircraft before squeezing passed one another to get through customs and baggage (think of all the infection opportunities), would then find somewhere to stay for 14 days and do absolutely nothing? Two people have been arrested for not self-isolating and face immediate deportation but whether the police are really good at catching self-exposers, or the processes are simply incapable of enforcing the edict is unclear.
In the same week, Justin Treaudeu’s wife was infected with Coronavirus and he joined her in self-isolation. That news was closely followed by the announcement from President Trump would close the USA’s border to travellers from Europe excluding the UK. I checked my Kiwisaver and moved it from Growth fund to Conservative. Inspired by the creators of pronoun shirt badges, I made one saying “HANDSHAKES X SALUTES ✔” I doubt I’ll ever join the supermarket panic shoppers, but it does appear I have been dragged reluctantly into the collective concern.
Quite possibly the biggest shock of all was reading the Taxpayer’s Union release on Monday, containing their recommendations to the Government on the tools that should be used to minimise the economic impact of CoronaVirus. It contained a much more serious disease in copious amounts: socialist economic ideas!!!
- Taxpayer-funded, 30 days sick leave for all workers for next twelve months.
- Use tax dollars to buy-out a proportion of struggling businesses as opposed to bailouts.
- Scrap the 2020 increase in minimum wage OR use taxpayer money to subsidise the increased minimum wage for eighteen months.
- Fund unlimited childcare for health, police and emergency workers for eighteen months.
- Partner with major supermarkets and uber to make food delivery free.
- Cut the bottom tax rate from 10.5% to 5% retrospectively and provided all taxpayers the difference retrospectively.
- Expand Winter Payments to commence immediately for 12 months.
- Suspend interest and penalties until 2020 for late tax payments by employers.
My view on why the Great Depression following the 1929 stock-market crash lasted a decade for some countries is the result of governments responding to the economic crisis by building a massive welfare state in conjunction with hands-on, interventionist economic policy. Few people know about the 1920-21 Depression which followed the conclusion of World War 1. With soldiers returning from the battlegrounds to find fewer jobs available, the economic crisis was largely driven by serious deflation in the value of currency. The addition of interference by the newly formed Federal Reserve, which deemed to respond to the deflation by increasing interest rates (the opposite advocated by Keysian theory now) led to a reduction of GNP by up to 7%.. Fortunately US President Harding continued with a laissez-faire economic policy, and the last economic depression to avoid political interference was sharp yet short; lasting just 18 months.
Every government program, action or package is funded using taxation. The taxation is largely collected from the most productive, highest wealth-creating sectors of the economy. It is spent in sectors which have crashed, are declining or otherwise unable to sustain themselves. It is incredible to me that most mainstream economic thought relies on taking resources out of the strongest economic sectors to invest in areas that the market has deemed unsustainable as the solution to economic recession. Any business that ran in such a manner would quickly go bankrupt.
What is our Government’s response to the economic havoc of Coronavirus? A $12.1 billion package (in small print: over the next four years).
Extra $500m for Health Sector
Eh? Only 4% of your spending package to deal with a global pandemic is going into health? That’s a little bit surprising. I’ve barely remembered to mention the lack of details.
$5.1b Wage Subsidies for affected businesses in all sectors
This is a concept I can’t recall having seen previously, so it will be interesting to see how the Law of Unintended Consequences behaves. It is similar to the aforementioned concept of using wealth-creating sectors to invest in unsustainable sectors but doing so in response to a virus is a different scenario to most economic crises.
$126m in sick leave and self-isolation support
I appreciate having an employer that has already decided to pay staff who are required to self-isolate. I imagine most employers don’t have that ability.
$2.8b in changes to business taxation
Not as good as a tax cut. Only temporary, but not the worst thing this Government has done (or, as is usually the case, not done).
$600m initial aviation support package
It isn’t as if the aviation sector hasn’t already had enough lollies thrown at it. Air NZ was nationalised to prevent it going bankrupt. Most airports have some local government ownership. Airlines have been incentivised and pressured into continuing unprofitable activities by politicians; especially in the servicing of small domestic destinations.
$100m support package to help employees train to work in other sectors
Considering how tight the labour market is and how the virus has just made it even harder to use overseas labour, I doubt the government really needs to be paying for this.
$2.8 billion thrown at their own support base
The Winter Energy payment for beneficiaries and superannuitants, with zero-means testing, has been doubled this year. On top of a new beneficiary payment increase measure (tied to the median wage instead of CPI), weekly payments for those on a benefit increase an extra $25 permanently.
What a cheap and transparent way to exploit a health crisis. The fabled missing million, relied upon by earlier Labour election losers to cast a vote, just might be motivated to do so by the cannabis referendum. Therefore, let’s ensure they also vote Labour with some free money permanently. There is no rational economic argument for paying those who don’t work, in an economy with less than 5% unemployment, more money to not work. Considering the minimum wage is also going up $1.10 an hour in two weeks; making it less likely those currently unemployed will find employment when the minimum hourly rate reaches $18.80, why the hell would you make it even more comfortable for those currently lying on the couch to make a living?
Only weeks ago, Labour released its $12 billion infrastructure spending package. This week they released a $12.1b coronavirus response package. They’ve hinted at further spending packages, not including the Budget which comes in May.
This could be the most popular economic depression in history.