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Insights 17: 15 May 2020
Eric Crampton comments on Stuff about the vital investments missing from this year's budget
 
Oliver Hartwich warned in the NZ Herald about "shovel-ready" projects
 
New Research Note: Lessons from Abroad: Taiwan's Covid-19 Containment Model

An election year budget
Dr Oliver Hartwich | Executive Director | oliver.hartwich@nzinitiative.org.nz
Watching Budget 2020 delivered yesterday was a surreal experience. It was two things at once.

On one hand, the forecasts for economic activity, unemployment and public debt were gruesome. On the other, they appeared way too optimistic.

Take unemployment. It is predicted to peak at 9.6% before neatly falling back to just 4.2% within the space of only two years.

But how realistic is that? Even on the budget’s own assumptions, economic growth will remain negative until June 2022.

Despite the damage the border closure is doing to New Zealand’s key export industries, the budget assumes the economy to shrink by less than 5% over the coming year. That is the kind of recession resulting from something like the GFC, but not a pandemic depression scenario.

At the end of this exercise, each Kiwi household will shoulder public debt of about $80,000. But if both unemployment and growth forecasts err on the side of hope, we can only wonder how realistic this forecast is.

The budget was heavy in numbers. A few hundred million here, a few billion here – there were big spending initiatives for everything.

But it was light on demonstrating how these programmes will help repair the country. As KiwiBuild showed, good intentions plus government money do not automatically equate to success. But that lesson appears to have been forgotten and Budget 2020 is just KiwiBuild on steroids.

Curiously, the centrepiece of this spending binge is an unallocated $20 billion to be deployed where the Government may eventually see fit. As if the Provincial Growth Fund model, which operates along similar lines, is worth copying.

Most worryingly, while the Government frames this budget as a strategy to get the economy moving. But this strategy appears to be no more complex than: spend more money.

It should have been a budget to steer New Zealand out of this economic depression. But it reads like a budget in an election year.

The key takeaways? Bad forecasts that are still too optimistic. Heavy spending programmes that are light on ideas. Strategy talk with no strategic action. That was Budget 2020.

What we need now are practical, creative ideas to revive the New Zealand economy. There shall be many more opportunities to discuss better policies until the election.

Making the most of our new Covid-19-free superpower
Roger Partridge | Chairman | roger.partridge@nzinitiative.org.nz
In a world infected with a lethal virus, being virus-free is like being bullet proof. The coronavirus may have enveloped the globe, but it has been repelled by New Zealand’s five million-strong force field.

New Zealand’s newfound strength has come at a high cost. Hotels are empty. Tourist attractions lie dormant. And the country’s $5 billion export education sector is in tatters. Together, the two sectors make up almost a quarter of New Zealand’s exports.

A significant portion of the tourism losses will be made up if New Zealand opens its borders with Australia in an ANZAC bubble. If the Government, airlines and airports can construct effective quarantine procedures at the border, the prospects of engaging with the world beyond Australia look enticing.

Reviving the international education sector is an obvious first step. As the Initiative recommended this month in Open for minds: export education and recovery, capitalising on New Zealand’s Covid-19-free status by reopening to foreign students would allow the $5 billion export education sector to expand in response to the current crisis.

Beyond international education, professional sport may be an unlikely winner. Nils Coberger, head coach of the New Zealand men’s ski team, reports unprecedented interest from international ski teams wanting to train in New Zealand this winter.

Teams are keen to come here because the European World Cup season was cut short at the end of February. With the Winter Olympics only 20 months away, teams can make up for the lack of ‘on-snow’ training in the Northern Hemisphere.

Skiing is the tip of the iceberg. The Bundesliga football competition is desperate to restart to secure the television rights German football clubs need to stave off bankruptcy. Billions of euros are at stake. Yet, despite players and staff self-isolating, German football seems unable to sidestep Covid-19.

Sport New Zealand should invite the entire league to New Zealand, have them spend 14 days in quarantine and then fire up the “Bundesliga down-under.” What a boon that would be for hotels and the wider travel and hospitality industries!

With no need for big stadiums, perhaps other leagues and sports could be invited too. Britain’s rugby season is on hold. So is the Six Nations. New Zealand could host these as well.

Better yet, how about an open invitation to any sports league interested in broadcasting games from beneath New Zealand’s Covid-free cloak and willing to meet the costs of mandatory, well-monitored quarantining?

Covid-19 has weakened New Zealand’s economy. But eradicating it has given the country new strength. We should use it.

ATTENTION CITIZENS, THIS IS BIG BROTHER SPEAKING
Luke Redward | Research Intern | luke.redward@nzinitiative.org.nz
Lawyers and political commentators say New Zealand has gone “too far” in empowering its police force. This speculation must end. Big Brother is here and you have nothing to fear.
 
Not convinced? Fine, Big Brother shall explain why there is nothing to worry about!
 
We passed legislation in the House this week, even though the Unpatriotic Opposition tried its best to stop this from happening. The naysayers claim we have granted police authoritarian powers by allowing them to enter properties without warrant.
 
Citizens, fear not! The police are only permitted to enter a property if they think you are breaking our rules.
 
Anybody who claims the police will abuse this power is lying. Sure, the Australian anti-gang task force has used its similarly extraordinary powers to abuse the law – even using unleashed dogs as a justification to raid a private dwelling. But citizen, if you have nothing to hide then surely you must have nothing to fear!
 
And this talk about facial recognition as an infringement on your privacy rights is a load of hogwash. Don’t you want the police to easily identify those who are committing crimes against Covid-19 hygiene? 
 
I have even been personally assured the police will only temporarily use this new power. Don’t worry about cops refusing to relinquish these powers after this extraordinary time. After all, the Government always rolls back controversial law changes when things return to normal. Look at any history book!
 
But what about the concept of the rule of law, I hear you ask?
 
Well, we have been guaranteed by Crown Law that everything we are doing is perfectly legal. Citizen, I would not worry about it!
 
Oh, you now want to see the advice we got about these law changes? Sorry, the Attorney-General thinks releasing these documents might unnecessarily scare folk, so Big Brother will spare you this trauma.
 
Just remember citizens, we have your best interests at heart. We would never exceed our legal power, because we can’t exceed our legal power. After all, if we ever do something wrong, we can just retrospectively legislate it into existence. That’s how much we care about you.
 
So do not heed those commentators. Big Brother is on your side. Now is not the time for questions. Rest assured citizen, if you comply – and do nothing questionable at home – we’ll all get through this, united, as a proud country.
 
On The Record
 
All Things Considered
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