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Insights 23: 26 June 2020
NZ Herald: Oliver Hartwich says the West is in a new cold war with itself
Podcast: How to think about cannabis legalisation, with Eric Crampton
Newsroom: Eric Crampton on the potentially massive debt the Government would have to take on if another crisis hits

The price for overcaution
Dr Oliver Hartwich | Executive Director |
It says a lot about this economic crisis when a forecast of -4.5% annual growth is regarded as good news.

Yet that was the forecast the International Monetary Fund released yesterday. Unfortunately, it was not for New Zealand but for Australia.

In New Zealand’s case, the IMF kept its 2020 forecast at -7.2%. That is worse than Australia and the global GDP forecast at -4.9%. At least it is better than the -10.2% predicted for the Eurozone.

The IMF’s report A Crisis Like No Other, An Uncertain Recovery shows what an economic beast this crisis is. The recession is severe, the fiscal figures are eye-watering.

However, it is not a uniform recession. Some economies are hit harder than others.

Unsurprisingly, countries with high Covid-19 case numbers and stringent lockdowns show big falls in GDP. The UK, France and Italy are in this category.

Meanwhile, countries with low numbers generally fare better. For example, both Egypt and China are forecast to actually grow their economies this year.

This makes New Zealand a special case. On the one hand, New Zealand had few cases of Covid-19 by international standards. On the other, it is still experiencing a strong economic downturn.

There are two obvious explanations for this outcome. New Zealand implemented a hard lockdown, which was much stricter than, say, in Australia. Compounding this, New Zealand’s exposure to both tourism and education exports left the country more vulnerable to Covid-19 than its peers.

Both factors help explain why Australia appears to emerge from the crisis with less damage than New Zealand.

Australia had a somewhat smaller exposure to tourism. But the Australian Government also kept a greater part of its economy operational during lockdown. Australia’s criterion for allowing economic activity was whether it was safe to do so whereas in New Zealand all “non-essential” business was simply shut down.

At least with the benefit of hindsight, one would have to conclude that Australia’s strategy resulted in a better economic outcome. “Safety” should be the decisive criterion for managing the economy in a pandemic.

If that is true, then New Zealand needs to adjust its own strategy. This would mean opening the border with appropriate measures rather than simply keeping it shut to non-residents.

New Zealand could keep its border shut regardless of whether it is possible to open it safely. But that would mean repeating the mistake it made during lockdown.

As the IMF suggests, Kiwis are already paying a high price for an unreasonably cautious policy choice.

Playing politics with the Public Health
Dr Bryce Wilkinson | Senior Fellow |
The public health system is a political football.

Every change of administration is an opportunity to boot the ball at a different set of goalposts. Occasionally, all it takes is a change of Minister.

Professor Robin Gauld, director of the University of Otago’s Centre of Health Systems and Technology, has published at least two books and a substantial academic article on the structural instability of New Zealand’s healthcare system since the 1980s. The phrases in the titles, such as “Revolving Doors” and “One Country, Four Systems” set the scene.

Last week, the Government released the Health and Disability System Review panel’s restructuring proposals. They roundly reject the structure put in place by the Helen Clark-led Government in 2001.

The 2001 changes abolished the over-arching Health Finding Authority (HFA) and created 21 District Health Boards run by publicly elected personnel who lacked conventional board room expertise. As a result, the post-2001 system had no effective system-wide funding and purchasing coordinating function.

To their credit, the Treasury, State Services Commission, Te Puni Kokiri and the Crown Company Monitoring Advisory Unit advised the Government in 2001 its proposals were ill-justified. They were right. Multifactor productivity for health care and social assistance grew at 5.1% pa between 1997-2000 and at less than 0.1% pa between 2000 and 2018.

The Review panel’s kick at the ball would get rid of elected boards and create two new central agencies – the Health NZ and a Maori Health Authority – but with no clarity about the interface between their roles. Health NZ’s board will be the embodiment of conflicts of interest.

Those worried about a hidden drive for efficiency and accountability can relax. It will set out national-level plans along with regional, strategic, annual and asset plans – inevitably of a top down over-prescriptive nature.

However, anyone worried the system will muzzle the voice of end-users are right to be concerned. Users will remain disempowered by a politicised tax-funded system. Value-for-money price signals will remain muted and dominant government providers will naturally favour their own.

The Review’s proposals do not seem based on any clear diagnosis of the problems or offer clarity about why this new structure is the best way of fix them.

One thing is for sure: this won’t be the last time the health system is booted around the paddock.

Card games in a post-truth World
Leonard Hong | Research Assistant |
When in the US earlier this year, I came across many souvenirs mocking the country’s leader, including a card game called, Trump Cards: The Wackiest Game of Fake News.

It looked like a fun party card game in which players tried to pick out 'Fake News' from real quotes by President Donald Trump. A player receives one point for a correct answer and zero for incorrect answers.

So, let’s break out the card game and test your abilities. Did the US President really say these things or is it 'fake news'?

"I will make Mexico pay for a wall on the border." Ah yes, the infamous wall. Bingo! That’s an easy guess. The Donald definitely said this. 1 point.

"Bambi's mother was clumsy. She deserved to die." Nope, this one was completely fabricated. Good try. 0 points.

"To the fake Pocahontas, I won't apologise." A classic! Pocahontas was one of his nicknames for political rival Senator Elizabeth Warren. 1 point if you guessed the quote was real.

Right, now for something a bit harder:

"For anyone that has money, they know the first rule is to use other people's money." Sounds like Trump, doesn’t it? Well, it was really a quote from American rapper Kanye West.

"Sorry losers and haters, but my I.Q. is one of the highest — and you all know it!" Yup, Mr Trump again.

"I'm a perfectionist." Was that the US President? No, it was our Prime Minister Jacinda Ardern on the decision to drop to Alert Level 3. But it looked like a Trump quote, didn’t it?

If you miraculously got all six points, congratulations, you are immune to fake news… well, so you think.

Comedians and rappers are meant to have great one-liners, that's their job. I guess politicians also make a regular appearance on "History's Greatest Quotes Vol 1-59." In this world of fake news, it's not only difficult to tell what the truth is, but increasingly, what the original context was.

Trump Cards’ is fun for the whole family, but games like this are only possible because we are so used to quotes being pulled out of context by newspapers. In isolation, any line can sound terrible but clipping a few quotes from thousands of hours of speech doesn't help solve the problem of fake news. Even Ardern can sound like a buffoon out of context.

I can live with a fun card game, but I don’t think anyone is sure how to live in a ‘Fake News’ world that destroys context almost as a matter of course. You can quote me on that.

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