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Insights 32: 28 August 2020
Newsroom: Oliver Hartwich says Europe is managing Covid-19 in a controlled way
 
Podcast: Oliver Hartwich discusses the lockdown’s effects on businesses
 
NZ Herald: The wage subsidy is a murky IOU, but who pays? asks Bryce Wilkinson

Turning cities into ghost towns
Oliver Hartwich | Executive Director | oliver.hartwich@nzinitiative.org.nz
Walking around central Wellington, more shops are boarded up. On Lambton Quay, two bank branches recently disappeared. Just as the two Burger Kings on Lambton Quay and Courtney Place. Walking down Featherston St, there are empty shops every 40 or 50 metres.

Reports from New Zealand’s forbidden city, formerly known as Auckland, sound even more alarming.

Where Wellington’s economy was cushioned by steady public sector employment, Auckland felt the brunt of a private sector contraction and now another lockdown. A quick online search of advertised retail premises returned 122 listings in Takapuna alone.

Covid-19 is not the sole cause of this pain. Consumers were already banking using apps, shopping on Internet platforms and buying insurance without face-to-face contact. No wonder insurer AMI, for example, is closing all its brick-and-mortar stores.

The pandemic is accelerating these developments. OfficeMax this week announced shutting all their 14 stores in New Zealand. This follows The Warehouse Group closing six stores and jewellery chain Michael Hill three outlets.

Before the crisis, New Zealand retailers had an average margin of just 3.7%. It does not take much to push these businesses to the brink. Greg Harford, chief executive of Retail NZ, estimates that the second lockdown reduced retail spending by 40% nationally and 80% in Auckland.

He added that a quarter of Retail NZ’s members are not confident or unsure they will survive the next 12 months. That is roughly 6750 businesses.

As inner-city retail struggles, so does hospitality. It is not just the international tourists that are missing. With dying shops around them, people working from home and incomes falling, fewer people are dining out. Add to that another lockdown and this is a death sentence for many bars and restaurants.

No-one knows how long this Covid-19 disaster will continue. But we can already see the scars the virus will leave.

When this public health emergency ends, New Zealand will look different. Gaping holes will exist where there used to be shops, bank and insurance branches, bars, restaurant, jewellers, electronics shops and department stores.

To avoid creating ghost towns, we must find a way of saving lives without destroying the cities they inhabit.

Easing border pains
Roger Partridge | Chairman | roger.partridge@nzinitiative.org.nz
In mid-April, German sewerage experts were allowed through New Zealand’s tightly controlled border with the country still locked down at Alert Level 4.

At the time, Wellington ratepayers were paying nearly $100,000 a day to ferry wastewater by truck from the city's Moa Point treatment plant to a landfill. The German workers had specialist skills that were needed to fix a pipe that had broken in January.

New Zealand’s small size means both the public and private sectors often rely on international experts with niche skills unavailable locally. Without them, economic activity across the country risks grinding to a halt. With the Alert Level 3 lockdown in Auckland jolting an already faltering economic recovery, ensuring businesses can access the skills they need has never been more important.

Unfortunately, the scarcity of managed isolation and quarantine capacity means exemptions from the Ministry of Business, Innovation and Employment for overseas workers to enter the country are scarce as hen’s teeth. To address the scarcity problem, MBIE starts with a list of priority projects, with businesses not covered by the list needing to make a special case for exemption.

But a recent business survey reveals serious shortcomings with MBIE’s exemption process. Firms report the procedures are overly bureaucratic, inflexible and lack transparency.

Unless the problems are solved, major projects will stall, costs will overrun and critical overseas staff will be lost.

Fortunately, the Government appears to be alive to the problems. The Prime Minister recently said the Government is “keen to get local businesses more access to essential skilled workers to help grow the economy and create opportunities for resident Kiwis.”

The Initiative outlined how managed isolation and quarantine capacity could be upscaled in our July research note, Safe Arrivals. With business willing to meet the cost, existing budget constraints for Government-provided managed isolation could be significantly relaxed. This would increase the range of available facilities.

In the meantime, MBIE must ditch its priority-list approach to granting border exemptions. The Ministry cannot tell which critical workers are most critical to the economy. While it was surely critical that foreign sewerage workers could enter to fix Wellington’s pipes, was it really necessary for scarce spaces in managed isolation to be filled by workers on horse racing tracks?

If there are only a small number of spaces available for critical workers, the Government would do better by auctioning those spaces off among New Zealand firms than by handing them out for free for Ministers’ pet projects.

But the bigger concern is fixing the capacity constraints. With the economy’s unexpected shock from the current Covid-resurgence, it is critical that Government unblocks the pipeline of expert foreign workers businesses need.

A dog's tail
Humphrey | Top Dog | insights@nzinitiative.org.nz
Hey there, humans!
 
It’s no wonder you’re a dog's best friend. You always have tasty treats on hand, know the best places for walkies and you’re pretty smart too. It doesn’t take long to teach you to play fetch or give a great belly rub.
 
However, as your friend, I must say there are still a few things you could learn from us. No need to get your hackles up, though. My bark is worse than my bite. I’m just a little worried the world may be going to the dogs.

My pack and I have been on top of this quarantine and border business for a while now – when was the last time you heard of a case of rabies in New Zealand, for example – but I’m not so sure you humans are.
 
I heard things at the border aren’t exactly up to scratch and maybe that’s why Covid-19 is back. You aren’t even tested before leaving for New Zealand, and new arrivals get up to all sorts of shenanigans. Road trips from Auckland to Wellington when you’re sick, escaping managed isolation for a bag of chips or a bottle of Pinot Gris and sharing cigarettes with security guards (when they’re awake, that is).

Perhaps I should let sleeping dogs lie, but until recently nearly two thirds of border workers weren’t even tested for Covid-19 despite numerous assurances from your pack leaders to the contrary.

It’s not that way for us. 

I recently returned home to New Zealand after exploring my French roots (my mother was a poodle). I had to plan my trip with military precision to make sure the Ministry for Primary Industries (MPI) would give the go ahead. 

I had multiple blood tests, vaccinations, treatments and health checks. All up I counted six precisely timed visits to my vet in Paris and two additional visits to the official government vet to check all requirements were met and that my paperwork was in order. I read MPI’s import guidelines to ensure my expectations aligned with reality which had even the French bureaucrats exclaiming “sacré bleu.”

And when I did my time in quarantine, I assure you there were no trips to Animates to pick up essentials. That’s despite arriving with nothing but the collar on my neck since all my toys were destroyed in case of surface contamination.

Far be it from me to try and teach an old dog new tricks but throw a dog a bone and get the folks at the Ministry of Health to give MPI a call. They may have a few tips, or perhaps I’m just howling at the moon.
 
On The Record
 
All Things Considered
  • Graph of the week: Number of Fortune 500 companies per country, 1995-2020.
     
  • The very small island countries that have kept Covid out.
     
  • “Most of the time, most people do not know (precisely) what they are talking about.”
     
  • Why are tennis crowds so quiet?
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