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Massey University's Alison Brook on whether we are ready to leave lockdown, the chances of an Aussie summer holiday, wage subsidies and zombie companies, exports will be the key and celebrity backlash in the Age of Covid

Massey University's Alison Brook on whether we are ready to leave lockdown, the chances of an Aussie summer holiday, wage subsidies and zombie companies, exports will be the key and celebrity backlash in the Age of Covid

Today's Top 5 is a guest post from Alison Brook of the Massey University GDP Live team.

As always, we welcome your additions in the comments below or via email to david.chaston@interest.co.nz.

And if you're interested in contributing the occasional Top 10 yourself, contact gareth.vaughan@interest.co.nz.

See all previous Top 5s here.

1. How ready are we for exiting lockdown?

Bhaskar Chakravorti writes in The Conversation that a country’s ability to successfully exit from lockdown will depend on two factors: digital preparedness (being able to shift much of its economy online) and being ready and able to manage any future outbreaks. The author ranks New Zealand well on both fronts. Let’s hope he is right. The IMD World Digital Competitiveness Ranking from last year placed NZ a modest 18th out of 63 countries, slipping from 15th in 2015. We did well in terms of e-participation, the ease of starting a business and inflows of foreign students, but comparatively poorly in terms of high tech exports and use of robots.

Source: IMD World Digital Competitiveness Ranking

From The Conversation:

Around the world, not everyone has affordable, reliable internet service; or the jobs, devices and digital apps that would let them work productively from home; or ways to make payments and get public services online. In some countries – though not all – workers who can’t do their jobs remotely can reduce their in-person contact by using digital transactions, whether it is for carry-out food, e-commerce or receiving bailout checks and unemployment benefits.

Countries such as Germany, New Zealand and South Korea are strong in both disease-fighting and digital-economy preparedness. Their economic activity isn’t as dependent on in-person interactions, and authorities can respond quickly if loosened rules result in a spike in cases. In contrast, the U.S., Italy and Japan face different challenges before they can safely lift lockdowns.

2. We could know as soon as the end of the month whether we can plan an Aussie summer holiday.

With our borders effectively closed to foreign tourists for at least 18 months a “trans-Tasman travel bubble” is starting to look like the best way to save our ailing tourism industry. The advantages for New Zealand are particularly clear. Last year New Zealand had 3.88 million overseas visitor arrivals, almost 40% of whom were Australians. Our Aussie cousins also made up around 24% of New Zealand's international visitor spend.

9 News Australia reports:

Nine.com.au has learned a special working group has been established, and will advise the Australian and New Zealand governments on issues such as border controls, inflight protocol and track and tracing.”

“A source familiar with a new working group set up to advise the two governments how to safely open a Trans-Tasman bubble told nine.com.au a key report could be ready by the end of May.

The 'Trans-Tasman Safe Border Group' is made up of about 20 experts in health, airline, airport and border representatives from each country.

The group will recommend how to safely process travellers at the border, without the need for a 14-day compulsory quarantine or self-isolation period.

3. Australia rethinks JobKeeper Wage.

Photo by Chris Hall on Unsplash

Australia is rethinking its JobKeeper wage – the most expensive wage subsidy in its history – amid concerns that it is propping up zombie firms that will disappear as soon as the subsidy ends.

Wage subsidies were put in place in a number of countries to retain the connection between workers and their employers, and to enable businesses to quickly restart once the pandemic restrictions ease. The dangers of continuing to pay wage subsidies after restrictions begin to ease was flagged a month ago by the OECD. Zombie companies have been on the rise since the Global Financial Crisis. They have been able to stagger on, due in part to very low interest rates. Zombie firms pose a major drag on economies and mean they are less resilient to shocks – much like the one we have just experienced.

News.com.au reports:

“The current JobKeeper scheme is legislated to end on September 27, but new options under examination include: reducing the $1500 subsidy, targeting it at smaller businesses, or limiting it to particular industries that are hardest hit by COVID restrictions.”

“The Prime Minister has outlined a three-stage plan for businesses to end hibernation but with thousands of cafes and restaurants set to reopen by June, there are real questions over whether all businesses need the $1500 a fortnight until September 27.”

[Deloitte’s Chris Richardson] warns JobKeeper is creating “Zombie firms” that will disappear as soon as the wage subsidy is removed, forcing workers onto the dole.

“One pandemic is enough for a lifetime and there is a risk that JobKeeper, as a measure designed to preserve jobs, could eventually create ‘zombie firms’ that neither fully recover but don’t go bankrupt. This would slow the broader recovery,’’ he said.

4. Exports not “buy local” will be the key to economic recovery.

Photo by Kelsey Knight on Unsplash

Michael Reddell of The SSANSE (Small States and the New Security Environment) Project at the University of Canterbury makes a strong case in The Spinoff for NZ to double down on boosting foreign trade if we are to improve our persistently low productivity performance. Despite being labelled a “rockstar economy” a few years ago, New Zealand’s productivity growth has been dismal, which means we have actually been getting poorer for decades. Now that we will add high unemployment to the mix, we can’t afford not to look outwards, and to address some of the long-standing structural issues in the country.

As Reddell describes it:

Turning inward is simply not a sensible option for New Zealand – perhaps not for any country, but particularly not for small, remote New Zealand with such a poor productivity and trade record. Domestic demand isn’t unimportant, but much of the focus – whether in getting back to full employment quickly or building a more prosperous New Zealand in the medium to long term – simply has to be outwards, improving the competitiveness of operating businesses from New Zealand and taking on world markets. And it needs to be private sector oriented, not state-led.

The business of government should be getting the policy settings right and then letting business get on with it. For now, that means an aggressively easier monetary policy – interest and exchange rate adjustment more akin to what we usually see in severe recessions – and beyond that action on foreign investment regulation, tax, immigration, and competition in domestic services sectors.

5. We are all in this together. Except actually we’re not. Celebrity backlash in the age of Covid.

Photo by Laura Chouette on Unsplash

From billionaires assuring us they are fine as they self-isolate on their super yachts, to ultra-wealthy celebrities advising us to “stay home, stay safe” from their palatial country estates, it’s never been more difficult for the ultra wealthy to read the room. Are we seeing the beginnings of a backlash against the glorification of the ultra-rich and insta-famous lifestyle? Will celebrity culture have to morph into reflecting the new reality of the masses?

Guardian columnist Arwa Mahdawi reports:

Celebrities being clueless is nothing new, but it feels as if there has never been such anger levelled at the jet set. Far from being a “great equaliser”, coronavirus has made inequality impossible to ignore. That is not just wealth inequality, but inequality of access to healthcare. A new famous person seems to test positive for coronavirus every day while exhibiting mild symptoms at best. Meanwhile, our friends and family can be coughing up their lungs and still not get access to a test or a hospital bed.

Celebrity culture and capitalism are inextricably entwined. Both elevate the individual over the collective good. They rely on the lie of “meritocracy”: work hard and you can achieve whatever you want. But it has become uncomfortably clear how little we value our hardest workers – the healthcare professionals, supermarket staff, bus drivers and delivery drivers who are keeping the world running while the rich run to their second homes. And it has never been so clear how little the people who earn the most contribute to society. “We’re all in this together,” the rich and famous keep telling us. Sorry, but it is obvious that we are not.”

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17 Comments

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"Australia is rethinking its JobKeeper wage – the most expensive wage subsidy in its history – amid concerns that it is propping up zombie firms that will disappear as soon as the subsidy ends."

I like Australia.

I'm not sure they are right though. Many small business's will be operating on very tight margins, we hear that often. So there will need to be some overrun from the subsidies. The intent is to keep workers connected to their jobs, but a return to work does not necessarily mean that the business can automatically pick up their wage bill. it will take some time to build up the turnover and cash flow to do this. But those business's will have still been generating liabilities while closed, and landlords and banks may not be prepared to give discounts.

Students are having a field day on jobkeeper in Oz. You get $1500 a fortnight whether you were full time or part time. Students who did about 5 hours work a week before Covid got about $100-200 a week. They now are off work getting paid $1500. Playstation and Xbox sales have gone insane. Also, lots of jealous full time workers getting very angry about their part time workers getting the same deal. Fair enough too. Bad planning.

We always worry about the little people and tax...yet the super wealthy paying around 8% is always just playing by the rules.

You raise a valid point, because its these super rich that (pay little tax) own the businesses that have made the cost of living so great and are currently benefiting from this temporary cash injection.

The challenge for democracy is to rid itself of self serving politicians who largely work for these super rich. The recession has a while to play out yet, and one hopes the masses unemployed and those barely scratching out a living take it on themselves to hold politicians accountable.

I have a feeling those self serving politicians and the super rich will go into hiding, for fear the pinch forks are coming. Oh..if they werent so greedy in the first place, the world would not be in the state it is in. The winner take all economic model is destine for the strap heap, while the past winners will now have to live in exile.

#5 the consequences of a privately funded health system.

And you could add to this restricting numbers into medical school, to keep the existing private medical business profits high.

If the student has a 80-85% average, why keep them from attending medical school. Government look around you. This country is desperately short of local doctors. Some of the imports have question marks written all over them, while higher grades don't necessarily translate to good doctors. Theory and application are very different. Like alot of systems, clearly entry to medical school after the intermediate year has been corrupted, and badly needs some independence (not interdependence).

"Last year New Zealand had 3.88 million overseas visitor arrivals, almost 40% of whom were Australians. Our Aussie cousins also made up around 24% of New Zealand's international visitor spend."

Based on Australia's skyrocketing unemployment figures I would count on these same numbers arriving...

Fair assumption.
Also, some who can afford to travel will travel in Australia out of nationalistic pride.

If NZ is the only international destination I would expect those numbers to dramatically increase

"amid concerns that it is propping up zombie firms that will disappear as soon as the subsidy ends."

I think this is reasonably valid. The useful purpose subsidy formed was to create certainty in place of panic (head off knee jerk mass firings). The idea that it was saving any business is a little overblown, those reckonings have simply been delayed. But hopefully those recordings will take place in a slightly more considered manner.

In NZ we have extended it for political reasons, but there is no election in Australia and no panic to quell.

Meh

Reddell is rapidly looking like an irrelevant dinosaur.

As are others peddling yesterdays' mantra......

""Exports not 'buy local' will be the key to economic recovery."" I cannot see that as a dinosaur statement. Both is ideal - keep local whatever we can but if PDK or others who enjoy contributing comments to this website think the devices they are using and the underlying internet hardware and software can be produced in NZ they are deluded. To lead any kind of civilised life (literacy, warm water, communications, cotton clothes, etc) we need imports and that means we need exports - the alternative is selling our land and businesses and they are finite resources. So lets us produce kiwifruit, wine and sheep and sell to the world. Yesterdays' mantra sounds more realistic than tomorrows day-dreams.

Yeah I have never been able to reconcile my views and feelings on buy local.

On the one hand I love strong local caring communities that help each other out. On the other I'm of the opinion that economies of scale, specialisation and competitive advantage are not some disconnected nasty market things but very real and significant part of the reason we live in such relative ease.

I suspect if you want to see screaming (stag?) Inflation and a return to a "simpler" life (forced for the masses against their will, rather than chosen as some prefer) then try and change your goods and services structure to local production only.

Buy local only enriches you when you do it but nobody else does.

I also wonder about the changes required if the whole world took the same approach.

It doesn't have to be an either/or approach? This balancing act between export and local-focussed economies in NZ seems to be exaggerated by our traditional over-reliance on labour-based primary industries, and for good reason - we're good at them. But we've been slow to diversify from this recipe, with the result that our knowledge economy still lags in automation, AI, and other aspects of the tech sector - all of which can provide 'added value' to both export and local.

And it's not just in tech. We've had a creative sector that's always hit well above its weight, yet for some reason it's not been considered as viable a proposition as traditional goods-based models. But consider the film, game, design and music industries - they are both exports and support local communities. It is possible to have your cake and eat it too...

"The reason we live in relative ease"

Who llives in relative ease?

Days to the General Election: 23
See Party Policies here. Party Lists here.