By Jenée Tibshraeny
The Government showed little regard for the economy today.
Not by prolonging Auckland’s lockdown by four days. But for failing to keep its word and couple this health response with financial support, and for failing to demonstrate the decision incorporated a thorough cost/benefit analysis.
Finance Minister Grant Robertson had repeatedly said he intended to extend the new two-week wage subsidy, should Auckland have to remain at Level 3 for longer than two weeks.
Robertson, as recently as Sunday night, told an RNZ reporter: “I’ve been upfront about the fact that were there to be an extension to the restrictions, we would also extend the wage subsidy scheme for a period, if it was a brief continuation.”
Auckland’s lockdown is continuing for an additional four days, but the wage subsidy is not being extended.
Prime Minister Jacinda Ardern made no mention of this in her lengthy address announcing an extension of Level 3.
When asked by a journalist whether the wage subsidy was being extended, Ardern provided a confusing response:
Of course, we’ve already got the two weeks covered for the wage subsidy - that remains as it is. What individuals who previously may not have been eligible for the eight-week extension will be able to count this full period of Level 3 as part of their application for that extension. So we will likely see more people eligible when they take into account that full period of restrictions.
In plain English: Businesses that haven’t already received the eight-week wage subsidy extension, still have until September 1 to apply. Some that hadn’t suffered large enough revenue drops to qualify, may be hit hard enough by a longer lockdown to be eligible. But businesses that have received this eight-week subsidy, and are now on the two-week subsidy, cannot get an additional week’s payment.
Ardern also said there was no plan to provide targeted support for hospitality businesses.
When asked by interest.co.nz (at 38min 45sec in the video) why not extend the two-week subsidy to three weeks, Ardern said:
It does imply that… it’s a simple act to extend for a four-day period. It is not.
We are already processing, and have tens of thousands of applications that are already being processing with those payments.
And so, our view is, if we find ourselves any longer than that, then absolutely we will come back and revisit that decision. But for now, with a Sunday cut-off, we’ve kept it as it is.
Put to her that Robertson said the subsidy would be extended, Ardern provided another jumbled response:
Keeping in mind, the extension was due to lift roughly on Wednesday midnight. Now we have several extra days where it is extending.
Of course, people will have different work cycles for that period.
The decision has been made, if we extend beyond where we are now, yes we come back. But with a Sunday lift, we are processing those applications as they stand.
It is not a simple exercise to simply tack on additional. It would require an entirely new application process and regime. Our focus is getting the money out the door quickly for everyone who’s already applied.
If I was a business owner, I’d be thinking, ‘It’s no simple exercise for me to scale my operations up and down with alert levels or make staff redundant. Why can’t you add an extra week’s payment to the subsidy without requiring a new application?’
I’m sure we can all agree the Government can’t keep paying wage subsidies willy-nilly. Even Robertson has acknowledged this. Ardern has also recognised the intention isn’t to go into lockdown every time community transmission of the virus is found.
But until systems are strengthened to the point the spread of Covid-19 can be controlled without a lockdown, additional support for business is surely required.
No, the taxpayer ideally shouldn’t be propping up businesses doomed to fail. And yes, the Covid-19 bill is adding up.
But I would rather the taxpayer fork out $585 a week to keep someone employed while heavy restrictions are in place, than $490 a week to support them for up to 12 weeks via the Covid Income Relief Payment, and possibly for longer after that if they have to go on Jobseeker Support.
What’s more, with the Reserve Bank doing everything it can to reduce interest rates, which helps asset owners the most, it’s essential the Government does what it can to support those who aren't necessarily enjoying reduced mortgage repayments or aren’t in a position to borrow and invest.
The RBNZ’s monetary policy response is top-down in that it provides support to those with debt through the banking system. The Government needs to ensure there’s a sufficient bottom-up response, and support is reaching those who need it the most.
Money aside, if Ardern said, ‘We will temporarily provide some support, like we said we would, as we understand the impact of this lockdown is worth more than 18 days of disruption,’ this would've provided a bit of confidence, which would've gone a long way in the current environment.
Question mark over cost-benefit analysis
But, adding fuel to the fire, Ardern couldn’t confirm whether Cabinet asked Treasury to provide it with a cost-benefit analysis on what to do with alert levels.
She dodged questions (at 24min 33sec in the video) on the matter, making the point in a long-winded way, that it’s impossible to know how the virus would spread differently at Level 2 versus Level 3, and how this would impact the economy.
She said any economic modelling would be based on a number of assumptions around Covid-19 clusters.
This is a fair point. Imperfect information makes economic forecasting virtually impossible at the moment. But what we needed Ardern to say was, ‘Yes, we engaged with Treasury and its best estimates under these scenarios are…’
Many of us agree healthy people make for a healthy economy.
But today was a day for the Prime Minister to allay businesses’ concerns and let them know she values economic advice as much as she does epidemiological advice.
Ardern needed to show she’d made an effort to be as eloquent when talking about the economy, as she is when rallying the troops in the fight against the virus.
She missed that opportunity.