John Armstrong: Ardern and company have barely reached base camp in dealing with Covid-19 economic upheaval

Jacinda Ardern and her Cabinet will be deciding next week when to move from Alert Level 3.

It might seem the height of pettiness to even mention it. But Jacinda Ardern’s oft tugging of people’s patriotic heartstrings as a means of harnessing public backing for her administration’s approach to combating Covid-19 this week saw her veer dangerously close to straying into the ultimate political no-go zone.

No-one seemed to notice. And even if someone had done so, they would likely have dismissed any suggestions that she was right out of line given the prevailing view that this Prime Minister can do nothing wrong.

Had it been Simon Bridges who had declared that New Zealanders thought of themselves as “halfway down Everest” in the struggle to eliminate the coronavirus and that no-one wanted “to hike back up that peak”, no doubt he would have been accused of feeding on the legacy of the most famous New Zealander of all.

It was part way down the descent of the mountain that Hillary uttered his most famous words: “Well, we knocked the bastard off!”.

It is hard to imagine such language being intoned by Ardern. That is not least because to declare that the virus has been “knocked off” is to invite its resurgence. No-one knows enough about the pathogen’s behaviour to be confident of accurately predicting what it will do next.

Maybe the Prime Minister should share the benefits of her caution with the Deputy Prime Minister.

Winston Peters’ assertion that New Zealand and Australia are “beating the crap” out of the coronavirus is similarly to invite trouble.

When it comes to the economy, you don’t have to be a genius to conclude who is beating the crap out of whom.

As far as climbing that particular mountain goes, Ardern and company have barely reached base camp on the way up.

But the trick will be applying necessary coronavirus changes, 1 NEWS’ Dewi Preece reports.

That is why if you think the pending downwards shift of the current Covid-19 alert level could yet be the economic panacea that many seem to think it might be, then you are sadly deluded.

No-one would wish to add their voice to the Jeremiahs’ chorus warning of a lot more economic pain and gloom ahead — especially in the wake of Thursday’s much-anticipated “good news” announcement by the Prime Minister which detailed much of the more relaxed provisions which will govern the conduct of life once the state of national emergency is scaled down a notch to Alert Level 2.

Throughout the close to three months that have passed since the coronavirus began to cast its dark shadow across just about every facet of the human existence, the public has daily had to digest an unrelenting and undiluted diet of unremittingly awful news.

In paving a path back to some kind of normality after weeks in lockdown, Ardern’s pronouncement was accordingly greeted with a huge collective sigh of relief up and down the nation.

There was a palpable and justifiable sense of liberation. No longer will people have to bother with their “bubble”. No longer will travel within New Zealand be subject to the strict curbs which applied during alert levels 3 and 4.

There was no cause for celebration, however— especially that emanating from some sectors of the economy which have taken huge hits from the virus.

The prime example is domestic tourism which is literally on its death bed gasping for oxygen. Those operators in that sector who argue that the canning of restrictions on internal travel — along with the inability of New Zealanders to holiday overseas for the foreseeable future — offers them a lifeline to survival are fooling themselves.

Such thinking is predicated on the economy performing as it did previously. It assumes that discretionary spending by consumers will follow much the same pattern as it has always done.

It won’t.

Across the economy, no-one is going to get rich following the Cabinet’s inevitable rubber-stamping of the move to Alert Level 2 when ministers meet next Monday.

Struggling businesses will likely struggle even more so. Many in trouble will likely go under in epidemic proportions, so to speak.

By example, take the okay granted for cafe, restaurants, bars, pubs and other operators in the hospitality industry to re-open their premises.

The Prime Minister gave an update today, ahead of the Government's announcement next week.

That was likely more than most working in such outlets dared to hope. But the conditions applying to their reopening inevitably mean less patronage compared to the number of customers that were coming through their doors during pre-virus times.

Most worrying is that consumer and investor confidence is now shot. Given that most people’s most valuable asset is their home, there is an understandable reluctance to talk about Covid-19, economic confidence and the state of the residential property market in the same sentence. 

That aversion is not going to stop the coming crash in prices, however.

If you question the validity of such an assertion, here is a question for you. Would you be willing to enter the residential property market given that the $1 million house you might buy this week could next month have plunged in value to $850,000?

Such figures are within the scope of some economists’ predictions of the scale of the coming crash in the property market.

Those boffins tend to talk in terms of percentages rather than in such gruesome dollar numbers.

That is perhaps just as well. For here’s the rub. It matters comparatively little whether such a scenario turns out to be accurate or not. It is the fear that such a hypothesis might turn out to be true which is crucial in determining behaviour in an already highly volatile and frighteningly over-valued marketplace.

Moreover, that fear will be the major feature underlying business sentiment in every market which comprise the modern economy. That sentiment finds expression in two ways during a marked downturn — either through panic or paralysis.

Fear is but one of the Four Horsemen of the Economic Apocalypse who have galloped into town on the back of the coronavirus, the other drivers of the New Economic Disorder being uncertainty, risk averseness and the aforementioned plunge in both business and, perhaps most importantly of all, consumer confidence.

Taken separately, each of these factors is a major dragnet upon the economy. 

Taken together, they are a prescription for an economic devastation.

That is not to mention the recessionary impact of what indisputably is going to be a humongous slashing of discretionary spending — at least by those still enjoying an income over which they still have discretion.

In such circumstances as now prevail, one word sums up the way household spending patterns will change — caution.

These are times when deciding or not to address New Zealanders’ truly frightening level of household debt is no longer a matter of choice, rather one of common sense.

Reporter Paul Hobbs, at a very empty Sylvia Park Mall in Auckland, has been talking to those on the front line.

Paying off more of the mortgage and likewise avoiding extortionate interest rate charges on credit cards is nobody’s idea of fun.

But there is not much fun either in flying in a near-empty plane to stay in a near-empty hotel in order to discover the shutters have been pulled down on every tourism attraction in town.

We are talking about the likes of Queenstown. The now one-time Mecca of South Island tourism might more aptly be renamed “Ghost Town”.

Next Thursday is Budget Day. As Finance Minister, it falls on Grant Robertson to use that platform to talk up economic confidence,   and in a credible fashion.

No-one will envy him for being handed that task. 

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