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Covid-19 Special: 17 March 2020
In his latest Newsroom column, Oliver Hartwich looked at how Covid-19 will cripple Italy
Graph: Confirmed Covid-19 cases by country
Nathan Smith discussed the effect of the virus on globalisation in a previous Insights issue

Covid crisis needs tough policy response
Dr Oliver Hartwich | Executive Director |
At our Initiative staff meetings over the past two months, Covid-19 already dominated our discussions. Startling as they are, we are not surprised by the events of the past days.

If the Government moves quickly and confidently to beef up its border controls, testing regime and quarantine measures then, given our limited number of cases now, there is still a slim chance to avoid a national health disaster.
We must stamp out the virus at all cost in New Zealand. Maybe it is not likely, but it is possible that New Zealand could remain largely Covid-19 free.
Protected by geographic isolation, with a big moat around our islands and with our low population density, we have a chance. It is only a chance – but it is a fighting chance.
And that means we must fight. If we do not fight, we will be like Italy in just a few weeks.
Therefore, we fully support the Government’s decision to introduce strict travel rules. The failure of other countries in Europe and North America to control or even monitor their domestic outbreaks left the New Zealand Government no other choice.
As tough as the travel measures introduced last weekend are, they will be futile if not coupled with equally tough measures within New Zealand. To avoid a future nationwide lockdown of the kind seen in Italy, Spain or France, we should learn from these other countries' mistakes and act faster.
We should also limit the virus’ chances to spread by pre-emptively limiting social contacts across the country for the coming weeks. The Government urgently needs to give clear guidance on what this means for both large and small events as well as for workplaces.
Most importantly, the Government must learn the lesson of putting in place a comprehensive testing regime and realise earlier the constraints on the national health system while aiming to increase its capacity over time.
Hong Kong, South Korea, Singapore and Taiwan successfully flattened their epidemic curves by rigorous and comprehensive testing coupled with self-isolation and good hygiene.
The New Zealand Government has announced its support package. It is a welcome step to help the country’s most vulnerable. It will not be the end of it.
We expect the Initiative’s policy discussions over the coming months to be entirely consumed by Covid-19 and the Government’s response. I would be surprised if the scheduled election goes ahead. In fact, we think it should not.

These are tough times for all of us. But these times also demand rigorous policy thinking so that New Zealand can get through this crisis. This is what the Initiative does best.

The fog of war
Dr Eric Crampton | Chief Economist |
In wartime, it’s often hard to know exactly what is going on. Good communication is critical but it’s hard for governments – or anyone else – to make good decisions in the absence of information.

I have watched this Covid-19 pandemic for some time. One of the first things I did after my summer holiday in mid-January was to attempt to purchase N95 masks – but they were already sold out. A month ago, I warned in our Insights newsletter that our ICUs were likely to be overwhelmed if things got serious. This week, that same warning showed up in Newsroom.

But there are lots of things I do not know, either because they are known and not disclosed, or because I missed them because of the fog of war. I would very much like to know the answers to a few questions.
  1. What is the current actual total testing capability and what are the plans for scaling it up?
The Government keeps announcing it has capacity to perform a high number of tests per day. But total testing remains well below this stated daily capacity, and the proper conditions for testing has precluded a lot of potential cases. We could easily have community transmission and not know until someone shows up at the emergency department with unexplained pneumonia. Today’s budget announcement included $5 million to boost lab testing capabilities. If testing is that cheap, why wasn’t there greater provision for it earlier? Are there other scaling constraints, and how are we easing them?
  1. How much can be done to increase intensive care unit (ICU) capacity?
It has been obvious for at least a month that our ICUs will be utterly overwhelmed if the virus breaks out. We do not have enough negative-pressure rooms, respirators, ventilators or ECMO (ExtraCorporeal Membrane Oxygenation – artificial lung) systems. And we do not have enough staff trained in how to use any of those systems either.

The Government has announced $32 million to purchase additional ICU capacity. How much of an increase can this provide and will it be enough? Has the Government identified the likely constraints in expanding this capacity and how to ease them? If ventilators and respirators are hard to source or sold out internationally, has the Government investigated encouraging manufacturing from domestic suppliers? Respirators and ventilators from 20 years ago are certainly better than nothing, are out of patent and could be built here if manufacturers could be certain about demand. It is not beyond the wit of Kiwi engineers and entrepreneurs to reinvent and build machines that were common decades ago, or protective gear. But they must be asked. Has the Government asked likely suppliers about potential options or considered announcing a price it is willing to pay for standard designs?

       3. What provisions has the Government made for expanding medical staff capabilities and reducing the burden on critical workers?

When the Registered Nurses of Ontario asked retired staff and other health professionals to assist with healthline phone lines, over 2,300 volunteered. Has the Government asked medical professionals which tasks can be done by retired health workers, or workers whose registration has lapsed, or by workers provided a minimal amount of training? Are we considering retraining schemes for furloughed workers? China quickly redeployed idle workers in Wuhan for tasks like recording temperatures. Will we really wind up with a situation with tens of thousands of idle workers because of the collapse of tourism while hospitals are crushed by the lack of trained staff?

       4. What sorts of measures is the Government using to monitor and enforce self-isolation?

Most people will behave themselves and observe self-isolation periods. The Government must have measures in place for spot-checking. Providing every detail of the scheme would make it too easy for some to evade detection. But simple measures like regular cellphone calls for incoming arrivals, combined with phone tracking to ensure the self-isolated remain near their home, would go a long way.

       5. When and under what conditions will different parts of the pandemic plan be activated?

New Zealand’s pandemic planning framework offers many options for reducing the spread of illness. Sensible approaches include strict localised controls when warranted to avoid the need for broader restrictions. But the relatively limited testing so far makes it harder to detect community spread. Community preparedness requires more discussion about the kinds of measures likely to be undertaken.

       6. What provisions are being made for securing aged care facilities?

We know elderly folk are at the highest risk. What provisions are being made to ensure staff and visitors do not put residents of aged care facilities at risk.

       7. Will the Government trust us with more information?

So far, Government communications have focused on reassurance and avoiding panic. We may worry that the absence of information about critical aspects can lead people to infer the worst, even when the Government is making sensible preparations behind the scenes. We really need to dispel the fog of war about current preparations. Being forthright about gaps might even encourage those able to help to offer assistance.

I hope the government starts providing a bit more detail on the planning going on behind the scenes. While I have lodged an OIA request for detail on the number of tests actually available, it should not take OIA requests to bring us out of the fog of war. We are, after all, on the same team here. And the virus is not monitoring our communications.

How the OECD thinks about Covid-19
David Law | Research Fellow |
Many international institutions will be considering the economic consequences of Covid-19 and what to do about it.

For three years, I worked in the Economics Department of the Organisation for Economic Co-operation and Development (OECD) and contributed to the production of its Economic Outlook – a publication looking at the growth prospects and policy challenges of member countries.

So, I know the OECD has some important advantages and can draw on the experiences of how its 36 members dealt with potentially similar shocks such as the 2008 Global Financial Crisis.

After New Zealand’s government announced further measures to combat the economic, employment and health impacts of Covid-19, we can now compare these with OECD recommendations.

For instance, the OECD stresses the need for additional fiscal support for health services to ensure adequate staffing and testing facilities, and all necessary prevention, containment and mitigation measures. Beyond this, measures are needed to cushion the effects of an outbreak on vulnerable groups, such as allowing flexible work arrangements and temporary cash transfers for people forced to go on unpaid leave.

For firms, the OECD highlights the importance of adequate liquidity in the financial system so banks can help companies with cash-flow issues. On top of that, tax reductions or delayed payment as temporary relief for firms are a good idea and targeted fiscal measures could be made to help companies most directly affected, such as those in travel and tourism.

Stronger government investment spending, particularly bringing forward planned repairs and maintenance of the public infrastructure, could provide further short-term stimulus.  More generally, there is a need for supportive monetary and fiscal policy for some time.  Compared to many of our OECD peers, New Zealand’s low level of debt puts it in good stead in this regard.

So how does the Government’s response stack up against these recommendations?

It includes significantly increased support for health, individuals and firms, together with the New Zealand Upgrade programme announced in January and the reduction to the official cash rate (OCR) earlier this week by the Reserve Bank.  This is all largely positive.

The efficacy of these measures will of course be up for debate and only become clear over the coming weeks as more details are available. There may be scope for better targeting and support for businesses and folk who need it the most along with the streamlining of getting them that support. 

More discussion on the OECDs policy advice can be found in the OECDs Interim Economic Assessment.

Singapore's successful containment of Covid-19
Leonard Hong | Research Assistant |
Plenty of first-world countries have been hit with Coronavirus cases and failed to stamp it out effectively. However, Singapore has once again shined as an example of clever public policy.

As of March 17, Singapore has a very low total number of cases with (243) because its government took what World Health Organisation Director-General Tedros Adhanom described as an “all-of-government approach."

How did it achieve this?

In the initial phase, Singapore focused mainly on border controls to prevent the virus entering. The city-state was one of the first to impose travel restrictions with China, then Iran, South Korea, Italy and now France, Germany and Spain as those places became infected.

It also imposed a mandatory 14-day ‘Stay-Home Notice’ and self-isolation for its citizens, permanent residents and long-term pass holders arriving from countries affected by the pathogen.

In the second phase, it prioritised hard containment by creating strict measures for tracing the virus’ spread, isolating individuals and treating the ill to keeping deaths low as possible. Its vigilant digital ‘Contract Tracing’ system also helped to locate the infected and map out the virus as it spread.

Singapore operates a centralised, top-down government system which makes it easy to compel people. In fact, the Home Affairs Minister deported three Chinese nationals – who were also permanent residents – for not following quarantine protocols and lying to officials.

Third, Singapore pursued economic stimulus packages to support the economy. In February, Deputy Prime Minister Heng Swee Keat announced an $S6.4 billion government programme, of which $S5.6b will assist businesses and consumers, while $S4b is tagged to support businesses with their wage costs.

Singapore achieved all this without enacting a lockdown and remains open to the world.

New Zealand has many similarities to the city-state. Both countries rely on free trade, boast similar population sizes and are advanced market economies. However, while New Zealand’s more liberal approach makes it harder to exert central control, there is plenty to learn from Singapore’s containment policies.

Today, Finance Minister Grant Robertson announced a $12.1b stimulus package to support New Zealanders and businesses. It follows Singapore’s example by including $5.1b in wage subsidies for affected businesses in all sectors and regions.

But there is more to do. Singapore and other South East Asian countries may provide inspiration for us.

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