As New Zealand’s battle with COVID-19 comes to an end, is an economic battle on the horizon? Comments made by Winston Peters have created quite the fuss with China. How will NZs economy fair as China decides how to respond?
A few ‘wrong’ statements
A word that comes to mind when thinking about the political career of Winston Peters is ‘provocative’. Peters, New Zealand’s Minister of Foreign Affairs and Deputy Prime Minister, did not miss that mark when he commented on Taiwan’s participation status in the World Health Organisation (WHO). Although Peters states he has supported Taiwan entering the WHO for decades, his current political office and Taiwan’s positive COVID-19 response gave him a platform on which to verbalise it. Peters remarked that “In the interests of international health you want every country in an international organisation designed to improve the world’s health.”
In response to Peter’s, Zhau Lijian, the Chinese Foreign Ministry Spokesperson, said that such words could damage current China-NZ bilateral ties. Lijian stated that the country (NZ) should “stop making wrong statements.” China considers such a statement as ‘wrong’ because of its ‘One China’ policy. This policy means that the same international organisation cannot recognise both China and Taiwan.
In the past, China has used economic coercion to create favourable outcomes for itself. This recently happened to Australia when officials pushed for an independent inquiry into COVID-19. China’s ambassador to Australia warned a boycott of Australian goods could ensue if Australia continued down that road. Following on several days later and once Australia, like Peters, backed Taiwan’s admission into the WHO, meat exports from Australia to China were suspended. In the past, similar tactics were also used on other states like the Philippines and South Korea. NZ, like Australia, exports a large quantity of goods to China. Figures show that 23% of NZ exports in 2019 went to China, a large portion of those coming from the meat and dairy industry.
The Ministry of Foreign Affairs and Trade website further lists education and tourism as key areas of NZ and China economic relations. NZs largest source of international students is China, hitting 40,000 students in 2017. The fees international students pay are important to NZs tertiary system. These fees cover approximately one-quarter of the expenditure in these institutions, helping subsidise domestic student costs. The students also bring money with them, contributing to the economy through the purchase of local goods and services.
On the tourism front, it is predicted that China will become NZs largest tourist market, with forecasts of the sector making $3.1 billion annually from China by 2024. The tourism industry is already heavily reliant on these Chinese tourists. However, this forecast could change, as was the case back in 2016 when China reduced tourism to Taiwan as a form of economic coercion. Over 2016, the number of Chinese tourists travelling to Taiwan decreased from 150,000 per month to 37,500 by October that year.
Implications for NZ? The suspension of Australia’s meat exports creates a more recent example and a similar situation to which NZ could find itself in. COVID-19 has already hit the worldwide economy hard and NZ is no exception. With NZ’s exports to China sitting at 23%, any large blow to this number will put a heavy strain on its economy; not to mention some of its most productive and quintessential industries. Similarly, a hit to the tourism sector due to the global pandemic creates an incentive for the NZ government to not further upset China. Once the borders open back up to the world, NZ will need Chinese tourists to come back full swing. Lastly, with many Chinese international students still stuck in China during the first semester of this year, the NZ tertiary education system cannot afford to have a further reduction in those enrolling to study from China.
Decision-makers in NZ need to be wary as they move forward with China. Should China find the need to employ economic coercion, NZ may find itself wishing for better days.
*The author’s personal opinion is not illustrated in this article. This article is a description of the current landscape, and what future implications could be.
Yitan L and Enyu Zhang, “Changing Taiwanese Identity and Cross-Strait Relations: a Post 2016 Taiwan Presidential Election Analysis,” Journal of Chinese Political Science, vol. 22 (December 2016), pp. 17-35. Images: Winston Peters: newshub.co.nz
Left Behind: The Story of New Zealand’s Gig Workers
Earlier this year, amid the unveiling of the government’s COVID-19 economic response packages, many individuals in a small but growing section of our workforce were left without the ability to access the wage subsidy scheme. While the government programs were designed to ease the burden faced by workers and businesses across the country; New Zealand’s gig workers were left with little help. Though the causes of this issue have to do with an understandable oversight in the implementation of the scheme, given that it took place during the government’s response to a global pandemic. The episode was still reflective of a larger discrepancy which has arisen within New Zealand’s employment framework in recent years.
The Rise of a New Economy
During times of economic change, an unfortunate consequence of the growth of new employment structures has often been the dilution of the protections offered to workers. The causes of these dilutions often relate to either an absence of adequate regulations or the creation of industrial norms which shift power away from our nation’s workforce.
Throughout the 1990s, the simultaneous rise of New Zealand’s service sector and fall of its industrial core saw the proliferation of individualised contract negotiations across our economy. As such contracts became the status quo, our economy began to observe the decline of organised labour, with union membership falling to an estimated 10% of the workforce in 2019, from a peak of over 45% in 1986. While this fall was largely driven by shifts in the attitudes of employers, few policy measures were taken to prevent this decline from occurring.
The consequences of the decline in union membership have been significant, with the portion of New Zealanders making less than 120% of the minimum wage rising to nearly 25% of our workforce in 2015. Despite this, most New Zealanders employed in the service sector maintained the right to receive a minimum standard of employment throughout this period of our economic history.
However, beginning in the mid-2000s and continuing into the 2010s, technology start-ups from around the world began designing systems to link those providing services with those requiring those services. These include apps like Uber and Ola!, which function as a medium which drivers can use to reach potential passengers. Throughout their history, these companies have framed the relationship between the platforms and their workers as being one where workers are entirely separate from the platform itself. It appears that in the eyes of these firms, workers are merely using the platforms to advertise their services and find customers
Ola and Uber, some of the largest ride-sharing apps in New Zealand
Though this framing may seem innocuous, it has had the effect of creating a grey area in New Zealand’s labour law, where workers in our gig economy find themselves outside of the frameworks used to govern our labour market.
Under the current legislation governing New Zealand’s labour market, workers are segmented into two categories: employees and contractors. Employees generally receive specific protections surrounding their working conditions, such as the right to collectively bargain, receive sick leave and receive a minimum wage. Conversely, while contractors receive some protection from unfair business practices, they do not receive the same level of protection around working conditions.
This system is based on the idea that contractors can afford fewer labour protections than employees due to the level of independence which they maintain. Indeed, contractors can control their working hours, their wage for any given job, and have the ability to move between employers easily.
While this system provides an adequate framework for regulating much of our workforce, the growth of services such as Uber, UberEats and Ola!, have given rise to a segment of our population whose working conditions fall somewhere in between employees and contractors: our nation’s gig workers. Gig workers often maintain a relatively high degree of control over their working hours, while their ability to determine their employment conditions and wages are set by the platforms on which they provide their service. Besides this, the relatively low number of widely used gig economy platforms offer challenges to the ability of workers to move between services.
Despite the nature of gig work falling outside of the traditional employment paradigm, workers in the gig economy are often classified as contractors and thus left in a position where they lack the independence of contractors and the protections afforded to employees.
The fears of the forgotten:
Going back to the issue with the government’s wage subsidy; the difficulties faced by gig workers related to the scheme’s eligibility requirements. To qualify for the subsidy, a contractor needed to show that they had taken steps to mitigate the impact which Covid-19, and the resulting responses, would have on their ability to work. While this may be a reasonable requirement for contractors who maintain the independence to move between employment providers and advertise their services in a range of ways, the dependence which gig workers have on large platforms limited their ability to take the necessary steps to qualify for the wage subsidy.
Given the rapid need to address the sudden loss in income which individuals and businesses across the country faced, the government’s decision to base the requirements of the wage subsidy scheme on the current categories of employment was understandable. However, the issue did reveal the urgent need for reforms to our system of regulating labour which account for the interests of gig workers.
Indeed, being ineligible for certain benefits is just one of the issues faced by workers in the gig economy. According to a 2019 study of Canadian workers, individuals employed in the gig economy were 50% more likely to experience helplessness and 40% more likely to feel as though they lacked control over their lives, when compared to those employed in the traditional labour market. Similarly, the same study found that gig workers experienced higher levels of anxiety and depression than other Canadian workers.
While the flexibility of gig work may provide some benefits to those employed in the area; the Canadian research on the reality of gig work reveals the immense harm caused by an absence of adequate protections in this segment of the labour market.
Increase targeting by labour inspectors to detect the misclassification of employees as contractors.
Give labour contractors the ability to decide workers’ employment statuses.
Penalise businesses which misrepresent an employment relationship as a contracting relationship.
Introduce disclosure requirements for firms when hiring contractors.
Reduce costs for workers seeking employment status determinations.
Put the burden of proving a worker is a contractor on firms.
Extend the application of employment status determinations to workers in similar conditions.
Define some occupations of workers as employees.
Change the tests used by courts to determine employment status to include a wider group of workers.
Extend the right to bargain collectively to some contractors.
Create a new category of workers with some employment rights and protections.
The proposals made by MBIE can largely be broken down into three categories: policies to prevent companies from misclassifying employees as contractors, policies to expand some labour protections to contractors, and policies to create new categories of employees.
Given that many of the policies suggested by MBIE have been implemented in developed economies such as Canada, the European Union (EU), and the United States, with varying levels of success; it is worth examining these cases to get a better idea of the ways in which these policies could be implemented as well as their potential consequences.
When examining strategies to regulate with the gig economy, a key point of difference between many of the different approaches involves a debate of whether to reclassify gig workers as employees, or whether to create a new category of workers to describe those employed in the gig economy. Both approaches carry a unique set of benefits and challenges in terms of balancing the extension of labour protections to gig workers with the maintenance of the flexibility desired by many of those workers.
Canada: The creation of a new category
In February of 2020, in a decision welcomed by Canadian labour activists such as the Canadian Union of Postal Workers (CUPW), the Ontario Labour Relations Board (OLRB) ruled that drivers for the food-delivery service Foodora were to be classified as ‘dependent contractors’, a Canadian labour category in-between employees and independent contractors.
The OLRB decision, which was reported to be the first of its kind in the province, stems from Ontario’s Labour Relations Act 1995, which gives dependent contractors the ability to unionise and collectively bargain with employers, as well as the right to receive reasonable notice of termination. However, under Ontario’s labour regulations, dependent contractors receive few benefits with respect to severance pay, sick leave or a range of other protections afforded to employees. While many Canadian labour activists supported the legislation as a step in the right direction, the law was criticised for not instituting protections equivalent to those of employees.
In a statement released about the ruling, the CUPW National Vice-President Jean-Phillippe Grenier noted that the verdict was “a critical decision towards better worker rights in the gig economy” while pointing out that “progressive legislation that will protect all precarious workers” were still needed. Conversely, Foodora Canada released a statement in which it argued that the classification of couriers as independent contractors “provided flexibility for couriers, allowing them to dictate when they work and for how long, to accept or decline orders, to choose when to take time off, to use their own equipment and to provide services to multiple delivery clients concurrently”, while noting that they “respect the Board’s process”.
The potential pitfalls associated with the legislation adopted by Ontario’s government were made clear a few months after the OLRB handed down its decision in the Foodora dispute. In late April, at the height of the Covid-19 pandemic, Foodora announced that it would be suspending its operations in Canada on the 11th of May. In a statement announcing their decision, Foodora cited the “highly saturated [Canadian] market for online food delivery” and an “inability to reach a level of profitability … that’s sustainable enough to continue operations”. The organisation did not draw any linkage between the OLRB’s ruling and their decision to end Canadian operations.
Given that Foodora was made to file for bankruptcy shortly after their announcement, reporting over $4.7 million in debt, and that no other delivery service followed the organisations lead; aside from the timing of the two incidents, there is limited evidence to suggest that Foodora’s decision was linked to the OLRB’s ruling. Indeed, despite some Uber drivers in Toronto having unionised earlier this year, the company hasn’t signalled any desire to leave the Canadian market.
Foodora’s decision to exit the Canadian market did highlight the disparities between the protections afforded to dependent contractor’s and other Canadian workers. While most Canadian workers are allowed up to 6 months of severance pay, the couriers at Foodora weren’t legally entitled to those benefits. It is worth noting that this would likely not be an issue within the context of New Zealand, given that no workers in New Zealand are entitled to severance pay.
France: Recognising Gig Workers as Employees
In contrast to the Canadian regulatory model, which created a new category of employment to account for the nature of gig work, many other nations have chosen to pursue an alternate path: treating gig workers as employees.
The rationale for treating gig workers as employees largely stems from the argument that despite gig work falling somewhere in between traditional notions of employment or independent contracting, the nature of gig work is similar enough to traditional employment to justify treating it as such.
In March of 2020, France’s highest court of appeals affirmed a ruling which recognised an Uber driver as an employee who was entitled to all protections afforded to other French workers. These protections include receiving paid leave, sick leave and minimum compensation. Beyond this, classifying Uber drivers as employees would require the company to pay employment-related taxes, which they have previously been exempted from.
In their ruling, the French court noted that “When the driver goes online on Uber’s digital platform, there’s a relationship of subordination between the diver and the company … the driver isn’t providing a service as a self-employed worker but as an employee”. Further, in their ruling, the French court highlighted that the ability of Uber to set the rates charged by drivers, evaluate driver’s performances, through user ratings, and penalise drivers with low ratings are indicative of the relationship between Uber and its drivers being an employment relationship.
An Uber spokesperson later suggested that “[the company has] made changes to give drivers even more control over how they use Uber” since the case was initially filed. The same spokesperson also noted that the ruling was not reflective of “the independence and freedom [of drivers] to work if, when and where they want”. However, the attorney for the driver in the case suggested that the ruling “will impact all platforms inspired by Uber’s model”.
The person is free from the control and direction of the hiring entity, both under the contract for the performance of the work and in fact.
The worker performs work that is outside the usual course of the hiring entity’s business.
The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.
While this legislation was successful in recognising the rights of gig workers, such as those who perform services for ride-sharing services, the law had some unintended consequences. By creating a standard of employment which was overly broad, AB5 also resulted in many genuine independent contractors, such as freelance writers, being left with some uncertainty over their future employment prospects. In the case of writers, this was partially because the bill required that any freelance writer contributing more than 35 articles each year to a publication be considered as an employee.
Shortly after the bill’s passage, Vox Media announced that they would be replacing around 200 freelance writers with a team of about 20 full-time and part-time employees. However, it is worth mentioning that many other outlets continued to hire California-based freelance writers in the aftermath of the law’s passage.
Around the same time, groups representing both journalists and photographers joined together to sue the Californian government over its passage of the legislation. Both groups in the lawsuit argued that limiting the number of articles a journalist could publish for a given outlet would violate the journalist’s right to free speech.
Examining the array of policies implemented to extend labour protections to workers in the gig economy; it appears that regardless of the strategy the government chooses to take when regulating the gig economy, extending non-equal protections to such workers would likely raise issues surrounding the fairness of such legislation. Similarly, laws which are overly broad may unintentionally impact genuine independent contractors across the country.
However, what is clear is that if we allow our gig workers to remain outside the realm of labour law as we move into a period of economic distress, when vulnerable workers are likely to turn to temporary work, we risk allowing the gig economy to reshape New Zealand’s labour market in ways which are likely to further entrench the economic and social inequalities which can be found throughout the country.
The potentiality and limitations of the role of evidence on decision-making in policy formulation
By Pau Sicat
In light of the recent rapid changes happening around the world due to COVID-19, many are arguing that adopting a purely evidence-based policymaking approach is required. That it has become more crucial than ever that evidence and science should be guiding the government response. For most, it would be easy to presume the role of evidence in policymaking taking centre-stage. That policy actors, such as politicians or even institutions, could simply make decisions based on scientifically-backed data provided to them by experts. However, this is an oversimplification of the role that evidence plays in the decision-making process under normal circumstances.
Ian Anderson defined evidence-based policymaking as “policy initiatives that are to be supported by research evidence, and that policies introduced on a trial basis are to be evaluated in as rigorous a way as possible.”  Presumably, the more high quality and scientifically-proven evidence there is to support and inform the decision-making of policy makers during the policymaking process, the efficient and effective the policy outcomes.
But, because of the realities of the complex nature of institutions and policy actors, the notion of evidence-based policymaking being prioritised remains contested, despite the potential enhancements it could offer to the system.
An evidence-based approach to decrease the frequency of policy failures
In practice, policy failures happen more often than one might think, often as a result of the complex and intricate processes that define policy making. It’s an incredibly difficult task to balance and find a compromise between competing interests within the political arena. An evidence-based approach could potentially improve the policymaking process by making it easier for policy makers to manage and prioritise those varying interests effectively. However, with the abundance of accessible information we have at our disposal today, the sources of policy failures point to the lack of effective management of it all. According to Michael Howlett, the following are multiple sources of policy failures that are often mentioned in academic literature :
“Un-addressable problems” refer to complex issues such as climate change which require highly organised collective action among multiple governments across the globe
Governmental failure to anticipate the consequences of their decisions from ineffective evaluation of the policy processes and potential outcomes
Failure to learn the appropriate lessons from their own or other government’s previous experiences
The sources of policy failures highlight the mismatch between government expectations and actual real-life conditions, and it begs the question of the role of analytical policy capacity concerning evidence-based policymaking.
Policy analytical capacity as a pre-condition for effective evidence-based policymaking
The term “policy analytical capacity” refers to the systemic arrangements put in place by the government to ensure that policies are working as they should. They make sure that the government has the ability or resources to carry out evidence-based policymaking. 
Policy capacity also opens up opportunities for greater policy learning, or in other words, gaining knowledge of policies used in other countries. It is when decision makers compare and contrast current problems to previous problems within their own, or other jurisdictions, who they believe to represent the optimal practice to resolving an issue. Knowledge acquisition from other jurisdictions enables the government to look at policies that may be successful in other countries and then apply it to their own. It’s despite the different political, cultural or societal context the policy is in, the government can evaluate which aspects of those policies are successful in their particular context and why they succeed in that context.  Assuming there is sufficient scientifically-backed evidence and knowledge gained through policy learning, governments could transfer a policy from another country and implement it in their own by using acquired data to recontextualise successful policies to fit within their jurisdictions. However, this is a difficult process that as said, requires sufficient evidence and knowledge, and will always be limited in ability to be directly transferred. Policy analytical capacity requires governments to routinely evaluate their resources to identify possible gaps in their system. This task is already quite challenging in itself, it remains the determining factor of a government’s ability to implement an evidence-based approach in public policy more effectively.
The practical implications of incorporating an evidence-based approach to policymaking
It is easy to assume that adopting evidence-based policy could potentially help policy actors make better and more rational policy decisions. This approach has its limitations despite providing more evidence. Evidence-based policymaking is more difficult in practice because of the numerous policy actors, such as interest groups, who contribute resources or evidence towards the policymaking process. It is likely for these policy actors to have different sources of evidence on a particular issue. The varying, and perhaps conflicting, outcomes may have a detrimental impact on the overall efficiency and effectiveness on the policymaking process. This is due to the difficulties policy makers may face having to confront and choose between multiple sources of information and knowledge to draw their decisions from carefully.
According to Tim Tenbensel’s observations on his research on New Zealand’s evidence-based policy within the health sector, “The process of evidence gathering is thought of as a process of gradual accumulation; the more evidence collected, the more complete the overall picture that policy makers have to work with. It would be more prudent to assume that the relationship between different types of evidence in the policy process is incoherent and potentially conflictual.”  Although, it is often possible for governments to carry out experimental evaluations in order to figure out which evidence or policies work best within the context of a particular jurisdiction, it is crucial to acknowledge the prevalent issue of having sufficient government funding at hand to carry out expensive evaluations. It may be possible to deem the costs would justify its benefits, but there is then the question of who makes those decisions and what benefits are decided upon. As perfectly described by Peter Ridell, “[evidence-based policymaking] requires a recognised requirement or demand for research; a supply of qualified researchers; ready availability of quality data; policies and procedures to facilitate productive interactions with other researchers; and a culture in which openness is encouraged and risk taking is acceptable.” 
The demands that come with adopting a policymaking system that is wholly reliant on evidence-based decision making is, in turn, reliant on the policy capacity of a government. Such as the labour of policy actors in charge of gathering, managing and evaluating the abundance of evidence produced, which can become costly and highly time-consuming in an already complex policymaking process. Evidence-based policymaking is no doubt valuable, and can be incredibly successful in achieving desired outcomes, but consideration needs to always be given to how these decisions are happening.
 Anderson, Ian. “Evaluation, Policy Learning and Evidence-based Policy Making”. Public Administration 80, no. 1 (2002) 1-22.
 Howlett, Michael. “Policy analytical capacity and evidence-based policymaking: Lessons from Canada”. Canadian Public Administration 52, no. 2 (2009): 153-175.
 Anderson, Ian. “Intelligent Policy Making for a Complex World: Pragmatism, Evidence and Learning”. Political Studies 57 (2009): 699-719.
 Tenbensel, Tim. “Does more evidence lead to better policy? The implications of Explicit Priority-Setting in New Zealand’s Health Policy for Evidence-based Policy”. Policy Studies 25, no. 3 (2004) 190.
 Howlett, Michael. “Policy analytical capacity and evidence-based policymaking: Lessons from Canada”. Canadian Public Administration 52, no. 2 (2009): 153-175.
While the sixth week of lock-down comes to a close and the number of COVID-19 continues to fall, the fight is far from over. From the economy to domestic violence, the lock-down has touched every aspect of our lives. For the majority of us, the psychological impact of social distancing, falling job prospects, and an uncertain future will play on our minds and make staying mentally healthy significantly more challenging. We can see this reflected in the 50% increase in texts received by Youthline from young people. One in four of these concerned depression, self-harm, anxiety, or suicide. 72% of the 975 surveyed through Youthline say COVID-19 and the lockdown has impacted their mental health. In the USA, the death of Dr. Lorna M. Breen has brought attention to the mental health of those on the front line. With 11% of COVID-19 cases in New Zealand being healthcare workers, this might not be an issue exclusive to the USA. As such, an important question to be asking right now is: how will our Mental Health services potentially absorb a new influx of those seeking help?
On November 14th 2019, the Mental Health and Wellbeing Commission Bill was introduced to Parliament and is currently in its second reading. Despite this bill’s relatively recent introduction, the commission’s history dates back to 1996. The Mental Health Commission was created in 1996, as a ministerial committee, and then ratified as a crown entity in 1998 under Jenny Shipley’s National-led government. In 2012, the legislation expired under John Key’s government.
What is the Mental Health and Wellbeing Commission?
The primary focus of the commission is to provide independent scrutiny of the mental health system in New Zealand. As the bill is yet to be ratified, the ‘Initial’ Mental Health and Wellbeing Commission has been formed to lay the groundwork for the permanent commission to step into when the initial commission expires on the 7th February 2021. There are five members, each with expertise in management or mental health – typically both. The primary objectives of this commission are:
“Provide independent scrutiny of the Government’s progress in improving New Zealand’s mental health and wellbeing
Promote collaboration between mental health and wellbeing entities
Develop advice for the permanent Mental Health and Wellbeing Commission so it can make swift progress once it has been established, including a work programme, outcomes and monitoring framework”
How does the 1996 commission differ from the 2019 proposal?
Both commissions are born from a government report, in 1996 the Mason Report suggested a commission that had three main objectives:
“Monitor implementation of the National Mental Health Strategy.
Reduce discrimination against people with mental illness.
Ensure the medical healthforce is strengthened.”
These priorities reflected a sign of the times, where mental health was largely misunderstood, so decreasing discrimination was a priority.
The changing context is reflected in the 2018 He Ara Oranga: Report of the Government Inquiry into Mental Health and Addiction, which recommended the 2019 commission. The goal of this report focused predominantly around groups within the community which do not receive adequate mental health care, and what should be done to make care more equitable. The goals of this report were to:
“Hear the voices of the community, people with lived experience of mental health and addiction problems, people affected by suicide, and people involved in preventing and responding to mental health and addiction problems, on New Zealand’s current approach to mental health and addiction and what needs to change.
Report on how New Zealand is preventing mental health and addiction problems and responding to the needs of people with those problems.
Recommend specific changes to improve New Zealand’s approach to mental health, with a particular focus on equity of access, community confidence in the mental health system and better outcomes, particularly for Māori and other groups with disproportionately poorer outcomes.”
The 1996 Mason Report, on the other hand, reflected a rather vague direction to which the report was centred:
“… a sharply focused inquiry into the availability and delivery… of mental health services in New Zealand relating to semi-acute and acute mental disorder”
The writer then goes on to explain how the parameters of ‘acute and semi-acute’ would not work, and a focus on prevention should be examined.
How will this feature in today’s pandemic?
How heavily this commission contributes to providing mental healthcare to those affected by the COVID-19 pandemic will be a question of how fast not only the commission can operate, but how fast changes can be implemented into the healthcare services. The goal of the commission is to be able to analyse the mental health care services as a whole, as many mental health sectors are only able to see within their domain. As the fallout of lockdown will not be resolved in a matter of months, the commission will have the oversight to see how the system is handling this new influx and improve from there. Although the commission was created in an effort to tackle long-term problems, it is likely that in this climate Kiwis will see some short term steps.
What can you do if you would like to be involved?
If you would like to comment or advocate a position, while the Initial Mental Health and Wellbeing Commission Bill has stopped taking submissions from the public, you can still be involved. At any time your suggestions can be brought to the Health Select Committee concerning policy in the health sector. They can be found on Facebook, or through parliament’s website.
COVID-19 has and will continue to have a drastic impact on the New Zealand economy. Global travel has ground to a halt, trade has been reduced, people have lost jobs, and the stock market is extremely volatile. OECD secretary-general Angel Gurria has warned that the economic fallout of this virus will last far longer than the pandemic itself .
New Zealand’s current level 4 alert level and lockdown will likely end on the 23rd of April. After that, it’s unknown what will happen. It will likely be a descent down alert levels, and it could be a long time before restrictions are completely lifted. The economy should open up as we descend, but it likely will not be a fast return to normal life. We will have to get used to new ways of working and any business that has a high level of close human contact or relies on travel from overseas will likely have a longer recovery period. In our world of global trade, the impact on the economy and life will also be prolonged by other countries possibly recovering slower than our own.
Some are comparing our current situation to the 2008 financial crisis. IMF managing director Kristalina Georgieva said the outlook is “a recession at least as bad as during the global financial crisis or worse” . BNZ chief economist Stephen Toplis wrote that at the earliest, it would be “sometime in 2023 that [economic] activity will return to pre-crisis levels. And we would be surprised if the unemployment rate fell back below 5.0% before 2025.” 
How is the government responding?
The Reserve Bank has done what it’s designed to do — it cut the OCR from an already low 1% down to 0.25%, meaning that interest rates for banks and everyone are lower . Such monetary policy is usually the first line of defence against economic slowdowns. However, as University of Auckland economist Asha Sundaram told me: “I am not sure how much cutting the OCR will really help, interest rates globally are already very low. Except for stabilization, I think monetary policy has a smaller role to play. Fiscal policy will have to be very aggressive and at a large scale, which is where the wage subsidy, and bailouts will help.”
The wage subsidies and bailouts Dr Sundaram is referring to are part of a range of measures the government has taken to try to help people and businesses through this challenging time. Beginning with a $12.1b package on March 17th, and followed with a range of other packages, government economic assistance now includes :
$500 million boost for health
$8-12 billion in wage subsidies for affected businesses, initially with a cap of $150,000, which on the 23rd was removed.
$126 million in COVID-19 leave and self-isolation support
$100 million to redeploy affected workers
$2.8 billion in business tax changes
$2.8 billion income support package including a permanent increase of $25 to benefits and a doubling of the Winter Energy Payment for 2020.
$2.8 billion in business tax changes to free up cash flow.
$600 million initial aviation support package, possible to expand to $900 million at a higher interest rate.
$6.25 billion business finance guarantee scheme. Guaranteeing 80% of business loans to businesses with revenue between $250,000 and $80 million
Six-month mortgage payment holiday for those affected by the crisis.
New restrictions on landlords: Freeze on rent increases, and tenancies can’t be terminated during the lockdown period unless agreed upon by both parties.
$130 million support package to students. Including an additional $1000 to student loans, and continuing financial support to students who had their programmes discontinued.
To put just that initial 12.1b in perspective, it represents 4% of NZ’s 2019 GDP – a number similar to the entire Otago region’s share of GDP (4.4% in 2018) . However, that 12.1b was just the beginning of the government’s response even just to this point, so don’t be surprised if, in the coming weeks and months, even more packages of that kind are introduced. Finance Minister Grant Robertson has said that it has provisions of $52 billion for “cushioning New Zealanders against the impact of the virus” .
As such, some are concerned about the rising levels of public debt. However, New Zealand has mostly been operating with a budget surplus in recent years , and it currently has a relatively low debt to GDP ratio of 28% . This means the government should be safe to borrow capital as it needs it.
Experts think we are likely already experiencing the traditional definition of a recession: two-quarters of negative GDP growth. BNZ chief economist Stephen Toplis projects we will have between a 10% and 33% GDP drop in the second quarter , from here the question becomes how low will it go and how long will it last? From here the question becomes how low will it go and how long will it last?
Dr Sundaram said of the government’s response to the crisis “I think the NZ government is doing the right things… But I see some concerns and opportunities. I am concerned about inequality as we come out of the crisis – the worst hit will be small and medium enterprises and vulnerable individuals.”
“Cash transfers are particularly important for people at the lower end of the income distribution,” suggesting that now might be the time for “a UBI-type policy.” Dr Sundaram continued: “Our short to medium-term efforts have to be focused on beating the virus, saving lives, and ensuring the health and well-being of the population.” However, she does think that there could be some opportunities in the long term “can this be a chance to restructure the economy? Already, the slowing down of economic activity is proving to be good for the planet. Can we encourage the use of renewable energy and more sustainable economic practices?”
Airlines are both some of the world’s biggest polluters, as well as the biggest losers in this situation. Air NZ CEO Greg Foran has just said that 30% of the company’s workforce won’t be needed, and on April 9th, announced 1500 workers would be made redundant . However, Dr Sundaram asks, “As airlines are bailed out, can we incentivize them to be more climate-friendly?” It’s hard to see what kind of airline will come out of this crisis. It will undoubtedly be leaner, but it might also be greener.
Number of International Visitors
Connected to Air NZ’s suffering is that of the wider tourism sector. As New Zealand’s most significant export sector it contributes NZ$15.9bn to the country’s economy and directly employs 8% of the workforce, while indirectly employing many more . It is likely that we will be seeing if we haven’t already, similar redundancies to Air NZ’s taking place across the tourism industry. Or any sector that relies on a portion of their income coming from international visitors (hospitality, accommodation). While tourism isn’t just foreign, it could be a long time before we see any international visitors, let alone the 3.9 million we saw in 2019 .
Trade too could be impacted, likely not to the same level as tourism but still hugely important. We could see ourselves hurt drastically if one of our major trade partners (Australia, China, US, UK) had an unchecked outbreak, or if COVID-19 became a part of everyday life. Not only would this be a concern of human suffering, but in the global world, this will have a direct effect on how we live. In 2018 trade was 28% of NZ GDP, and as a small trading nation, it is an integral part of our economy. “Given how the global economy is currently structured, the spillover effects will be substantial. NZ businesses rely on demand overseas. Similarly, they rely on parts and components coming in from abroad.”
We already saw before lockdown the government spend $100million to redeploy forestry workers, a sector hit severely by a lack of foreign demand . It is possible we will see similar projects undertaken to help a considerable range of workers around the country who are affected. Since then projections have come out showing US unemployment could get as high as 30%, it’s hard to imagine that demand for New Zealand’s goods could remain as high in such a situation . Dr Sundaram does point out that perhaps we can find new ways to overcome these problems, “A more diversified economy can be more resilient. Can we develop core competency in exports of business services, for instance, since a lot of these services will probably be delivered online? Can we tap into the move to remote work and communication?”
Another legacy of this crisis could be an effect on the mentality, politics, and practicality of our global world. Populist movements against globalization and the US-China trade war appear to have cooled a bit recently. Still, Dr Sundaram thinks this might be temporary “we will face backlash to globalization again in the near future, the murmurs are already there.” This crisis has alerted us to some inherent risks in globalization “we should think about managing these risks. Perhaps diversify manufacturing across countries rather than relying on one country like China. While diversifying the economy across both sectors and trading partners.”
Dr Sundaram continued: “However, as a trade economist, reversing globalization would be a mistake, and small open economies like NZ would suffer the most. Many New Zealanders work in export-oriented industries that will be affected by an increase in protectionism worldwide. Many are immigrants, with global links that may be jeopardized by restrictions on travel. Globalization has helped millions come out of poverty, which has contributed to global demand-driven growth and prosperity that NZ has tapped into.”
Don’t be surprised if our economy is harshly affected by COVID-19 and the precautions taken to protect our health. We’re going to see public debt expand rapidly, but that’s something that has happened before, and our books are in good shape to be able to handle it. The hope is that through sound policy, fast reactions, and careful precautions by everyday people we can make it through the worst of this, and that economic recovery can begin as soon as possible
The immediate threat to our health and our lives is there. Only time will tell us what will happen to the economy. Some of it will be fine, some will have to adjust, some of it may disappear entirely, only time will tell. It could be a long time before life is back to normal, and could be even longer before we know the real effect on our lives.
The Public Policy Club is a non-partisan club at the University of Auckland that aims to encourage, educate and involve students from all backgrounds in the education and development of political knowledge. The views and opinions expressed in this article are those of the author and do not necessarily reflect those of PPC.