New Zealand is still counting the cost of the Covid pandemic and the response, the second phase of the Covid-19 Royal Commission has found, acknowledging the country recorded fewer deaths per capita than other comparable countries and lower case numbers.
The Covid-19 inquiry report, released on Tuesday, looked at vaccine approval and safety, mandates, lockdowns and tracing technology over 2021 and 2022.
“These key decisions involved some very significant and far-reaching uses of government power to limit the ability of New Zealanders to move about freely, meet with others, and to attend public events…” the report stated.
Spending
It said New Zealand’s March 2020 “‘go hard’ approach immediately proved successful in limiting infection and transmission, safeguarding the healthcare system and preventing deaths” and went “hand-in-hand with an immediate and generous economic and social package that sought to soften Covid-19’s broader impacts”.
By the end of the month, $12.1 billion had been allocated to business schemes, with another $2.9b allocated at that year’s budget to Covid-related social spending.
“The availability of financial support made it easier for people to comply with health measures (including staying at home), thereby helping to minimise infection and transmission. However, the financial support measures ultimately cost billions of dollars, contributing to domestic inflation.”
The report said the fund covered a wide range of initiatives such as the vaccination programme and wage subsidies, “however, around half of the total spending was not directly related to the pandemic, including infrastructure projects, and nature conservation and school lunch programmes”.
“Rather than being an actual sum of money ring-fenced by the Government for Covid-19 related purposes, the Response and Recovery Fund was a funding envelope for budget management purposes. It provided an indication of what the Government would be willing to spend, if necessary, to mitigate the impacts of COVID-19 on the health of New Zealanders and the economy.”
The fund started with $50 billion and had a top up of $4b in 2021 and $5b in 2022.
The fourth largest component of the fund was the ‘shovel-ready programme’, described by the inquiry as “not targeted to costs arising from the pandemic”.
“Also, shovel-ready projects are not by nature timely or temporary. Despite the name, they cannot be started immediately; they take time to ramp up, are difficult to stop, and typically run over many years. These constraints played out in 2021 and beyond.”
It called the wage subsidy scheme, the single largest economic measure at $18b as “consistent with the timely, temporary and targeted criteria”. It said the shovel ready scheme was not.
“Spending initiatives that had longer-term consequences, but were not easily reversible, constrained the options available to decisionmakers when the macroeconomic environment shifted in 2021.”
It also said while the wage subsidy scheme was able to be implemented quickly in 2020, alternatives could have been considered to prepare for further lockdowns.
"We are not aware of any sizeable component of the fiscal stimulus programme that was reviewed or cancelled to lessen the stimulus once the undesirability of further stimulus became clear."
Advice
The inquiry found that decision makers were sufficiently informed - but there were some limitations.
That included Cabinet papers providing more information about the health impacts than about social and economic impacts.
“Cabinet papers provided decision-makers with mostly high-level and/or qualitative descriptions of the economic and social impacts of lockdowns, for example GDP lost each week at various alert levels,” it said.
“We did not observe detailed modelling of the impacts of proposed extensions or ending of lockdowns on economic and social outcomes in the Cabinet papers.”
The inquiry said the absence of that data “gave decision-makers an unbalanced picture: they saw clearly the significant adverse health outcomes that lockdown restrictions would avoid, but they did not have clear or detailed forecasts of the adverse economic or social impacts of lockdowns”.
The report said Reserve Bank quantitative easing and other measures used during the pandemic had “significant costs”.
“The Government should review the sections of the Public Finance Act 1989 that deal with giving Crown guarantees and indemnities. The Act should specify more robust and transparent processes for giving large guarantees and indemnities.”
It found that macroeconomic forecasts were unreliable during the pandemic, and recommended in the future, should a similar scenario happen again, those making the decisions should it treat with caution and consider a range of plausible scenarios.
“If fiscal stimulus is considered necessary in a future pandemic, measures should be timely, temporary and targeted.
“Short-term supports that automatically adjust as circumstances change are preferable, and infrastructure maintenance and renewal should be considered ahead of new investment.”
Reaction
Labour leader Chris Hipkins, who was Covid-19 Response Minister at the time, said the decisions made were "considered, appropriate, and guided by the best evidence available at the time".
“Ministers and officials were making decisions in an unprecedented global crisis, using the best evidence available at the time. These decisions helped protect New Zealanders."
ACT leader David Seymour accused Labour of getting carried away with spending.
“Treasury said from the start that Covid spending should be timely, temporary, and targeted. Instead, Labour set up a $60 billion fund spread across 821 programmes, with around half unrelated to the pandemic.
"They went too hard too long, got drunk on power and were still paying for it."
"It's now a very valuable asset for the country to be able to avoid future responses like Labour's, because after they doubled public debt, we literally can't afford to do it that way again."
Responding to Seymour, Hipkins said the deputy PM was "more interested in politics than actually digesting the report".
In Parliament he read a quote from the report that said New Zealand "recorded lower case numbers and fewer Covid-19 deaths per capita than nearly all comparable countries. Our health system did not collapse. The economy rebounded strongly from the initial shock and unemployment rates remained low throughout the pandemic period."
4 Comments
There is fair representation on each side, in the last six paragraphs or so the, let’s say discussion, between Messrs Hipkins and Seymour. In the beginning, given all the unknowns and the perceived threat to health services and livelihoods in general, the government’s administration was both understandable and effective. From not all that long afterwards though, the notion of “drunk with power” is not inaccurate as many, many Aucklanders will attest. Those circumstances are illustrated rather categorically by the electorate itself, respectively the runaway win by the incumbent Labour government in 2020 and then the same government recording the worst defeat of any government in modern times, three years later.
Agreed. Polls and the massive voter losses in Auckland show the impact of punishing Auckland without real cause. People remember this.
Remember when we got to the 80% vax rate or whatever it was, then they changed the rules and decided every part of Auckland had to get there, and South Auckland was miles behind. That’s when it really turned to crap.
Be kind
Or we will be vengeful.
We welcome your comments below. If you are not already registered, please register to comment
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.