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Insights 19: 29 May 2020
The AM Show: Eric Crampton warns that the window is closing fast to reopen the border for international students
 
Podcast: Leonard Hong on how East Asia smashed Covid-19 early
 
Research Note: Lessons from East Asia's Covid-19 Containment

Sneaking a preview of our economic future
Dr Oliver Hartwich | Executive Director | oliver.hartwich@nzinitiative.org.nz
As we all navigate our way through this crisis, we are in uncharted territory. We cannot base our actions on experience because no-one has ever lived through a scenario like this. We do not have enough information about what is going on. 

Or do we?

For government, lack of data is an enormous challenge. To make the right decisions on spending and stimulus, it needs to know how economic activity is tracking in real-time. Ideally, it would also have information on specific industries and regions. 

Such information only becomes available when Statistics New Zealand releases its GDP figures. But that happens only four times a year, and then with a 2.5-month time-lag. 

Especially in a crisis like this, and particularly in an election year, government, business and the wider public should know earlier about the state of the economy. They all need to make decisions now and on more than gut-feeling.

Fortunately, thanks to seven years of economic research at Massey University, there is a better way: GDPLive.

Based on real-time data from the economy, a small team of researchers around Professor Christoph Schumacher has created a model to estimate current GDP as it happens. 

Using artificial intelligence, the software becomes more sophisticated with each daily input. 

GDPLive’s past predictions were stunningly accurate. On 31 December, it estimated growth of 0.527 percent for the final quarter of 2019. The actual figure, released by Statistics NZ on 19 March, was 0.528 percent.

I know this sounds like an ad, but it’s true: the model is a world-first and can even predict an individual sector’s performance and regional economic activity.
No wonder Schumacher has received calls from multiple Asian countries wishing to replicate what he has done for their economies.

Unfortunately, New Zealand’s response has not been entirely positive. 

Sure, the 2.5 million visits to GDPLive’s website show public interest in a real-time view of the economy. But so far, government agencies do not engage with its data. Massey University is no longer able to directly fund the project and no private sponsor has put up their hand to cover the annual cost of around $100,000. Ironically, GDPLive may be the victim of New Zealand’s worst-measured GDP decline ever. 

And since you asked, as of today for this year’s second quarter, GDPLive estimates it will fall by 16.3 percent.

The public will hear about this on 17 September.

To find out more about GDPLive, visit gdplive.net.

East Asia: The role model for Covid-19
Leonard Hong | Research Assistant | leonard.hong@nzinitiative.org.nz
Singapore, South Korea and Taiwan deserve praise for fighting Covid-19.

While Singapore and South Korea were hit with a second outbreak, their robust containment measures have kicked back in to stop rapid spread of the virus once more. As New Zealand ponders how to prepare for a future pandemic, it should look to East Asia.

Vietnam and Hong Kong also showed early success againt the coronavirus, but the New Zealand Government has focused its attention on those first three countries.

The common factor for their success was their experience with the SARS pandemic in 2003 and MERS in 2015. They built better epidemiolgocial and quarantine systems along with border controls, high-level diagnostic testing and rapid contact tracing capacities. They also regularly disinfect public spaces and encourage the public use of masks.

In the last few weeks, another outbreak of Covid-19 makes it appear Singapore’s performance was a complete failure, but it was not. These new community cases constitute only 7% of the total count and more accurately reflect human error in monitoring a handful of migrant dormitories than a systemic failure of the city-state’s response plans.

Further north, South Korea recovered quickly from an initial outbreak in March. The government’s ‘smart-city data hub’ allowed it to quickly locate cases again after a second outbreak occurred in Seoul bars. So far, a total of 1982 possible cases have been rapidly traced by this system, keeping the average number of fresh daily cases low at 23.  

Stanford University’s Jason Wang said Taiwan’s response was among the best in the world. Its timely border controls for flights coming from China began on December 31, 2019 – a full month before other nations thought about similar controls. By March 20, Taiwan only had 27 new cases. Once again, a digital surveillance system was critical in tracking down and isolating individuals with the virus.

New Zealand’s Covid-19 containment performance was impressive. But, as Kiwi epidemiologists have emphasised, its contact tracing system still has plenty of room for improvement. As South Korea and Singapore have shown, there is still a real risk of a second outbreak from even one new superspreader.

That’s why it is an imperative that New Zealand take this opportunity to repair and prepare its contact tracing capacity to ensure the country holds onto its hard-won gains. Those three East Asian states offer plenty of great examples to get this done.

Read: Lessons from East Asia's Covid-19 Containment.

Give us a break
Roger Partridge | Chairman | roger.partridge@nzinitiative.org.nz
When told the French peasants had no bread during a famine, the Queen of France, Marie Antoinette, is said to have exclaimed “Qu'ils mangent de la brioche!" – loosely translated as “Let them eat cake!”

Last week’s calls for extra holidays to support the ailing tourism industry are just as out of touch.

New Zealand is a nation of small businesses. Nearly half a million of them employ about a third of the workforce. And in the aftermath of the war on Covid-19 many SMEs are struggling – including in the tourism sector.

But the solution to New Zealand’s tourism woes is not an extra public holiday or two to visit Queenstown.

While everyone loves having days off, an unexpected statutory holiday either costs employers a day’s expected revenue or sees them incur extra payroll costs. Penal rates apply on public holidays and staff working statutory holidays must be given a day off in lieu.

An additional paid day off for employees comes at an equal and offsetting cost to employers. Taking from Peter to pay Paula will not generate extra national income for Kiwis to spend on vacation. At best it is a zero-sum game.

More likely it is a negative-sum game. Heaping extra costs on already stressed businesses may be the straw that breaks the camel’s back. And if the extra cost does not push a business over the edge, firms will simply employ fewer staff to claw back the extra costs of the additional holiday pay.

What may seem like a good way of helping the tourism industry would more likely end up hurting it.

Paradoxically, the best way to support the tourism sector is for everyone to be back at work. That way everybody will be able to afford a take a break.

We may all love cake, but we need to earn our daily bread to enjoy it.
 
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