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New Zealand backs lockdown strategy despite record contraction Economy shrinks 12.2% but Wellington adamant restrictions will lead to strong recovery
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New Zealand has entered its first recession in a decade but the government of Jacinda Ardern has been largely praised for its handling of coronavirus © Bloomberg New Zealand’s finance minister has defended one of the world’s toughest Covid-19 lockdowns following a record economic contraction, insisting the restrictions saved lives and was facilitating a strong recovery.
The country’s gross domestic product fell 12.2 per cent in the three months to the end of June, compared with the previous three months. The contraction has plunged New Zealand into its first recession in a decade, following a 1.4 per cent fall in GDP in the first quarter. But the drop was not as bad as initially feared, beating Wellington’s prediction in the May budget of a 23.5 per cent fall. My view is the best economic response remains a strong public health response Grant Robertson, New Zealand finance minister Grant Robertson, finance minister, said consumer confidence, spending and activity levels had recovered sharply in June and July when the nation went 102 days without a locally transmitted case of coronavirus.
An outbreak in Auckland, the nation’s biggest city, in August has been brought under control and the economy is bouncing back, highlighting the benefits of sticking with a policy to eliminate rather than suppress Covid-19, he said. “My view is the best economic response remains a strong public health response. Evidence shows us that when confidence lifts, businesses see more revenue coming in,” Mr Robertson told the Financial Times.Mr Robertson said New Zealand’s economy was performing better than some other nations, including the UK, which failed to impose lockdowns in the early stages of the pandemic and were now reimposing restrictions. UK GDP fell 20.5 per cent in the June quarter, compared with the previous three months. However, the sharp economic contraction risks reigniting debate about the elimination strategy pursued by Jacinda Ardern’s government, which faces an election next month.
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Grant Robertson, New Zealand’s finance minister, said the economic damage would have been worse if the country had not adopted an aggressive lockdown strategy © AAPIMAGE
Wellington has been widely praised for closing its international borders and imposing a strict lockdown when Covid-19 began to spread in the country in early March. The crackdown initially appeared to work, with authorities reporting 102 days without any local transmission. But a small group of academics, called Plan B, has argued that lockdowns are unnecessary and will harm employment and social cohesion.
Ananish Chaudhuri, a professor of economics at Auckland University and a member of the group, said elimination of Covid-19 and strict lockdowns were not feasible goals, even if a vaccine was developed in record time. “In a globalised world, unless we keep our borders closed for a very long time, we will need to get the entire world — or a large proportion of it — vaccinated. No one seems to be thinking of the logistical challenge of doing this in a reasonable span of time,” he said.New Zealand’s treasury forecast this week that the nation’s international borders would not reopen till January 2022.
Nevertheless, polls suggest the government’s Covid-19 strategy remains popular, with three in five New Zealanders supporting the decision to extend Auckland’s lockdown by four days last month.
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“Clearly New Zealanders have backed the strategy that the government's taken and, in fact, it is the reason why the strategy has been success- because of the so called team of 5m,” said Mr Robertson, referring to the country’s population.Nick Wilson, an epidemiologist at the University of Otago, said that elimination of the virus was probably the optimal policy for New Zealand because of the health benefits and the less severe hit to economic activity from lockdowns.
“If we had the death rates of various EU countries, it would mean several thousand deaths by now in New Zealand. Also, it seems the health burden from chronic health damage from Covid-19 infection — lung scarring, kidney damage and immunology disorders — is fairly substantial in some age groups,” he said. But Mr Wilson said relying on suppression and mitigation strategies for the virus could damage business confidence. “If virus is still circulating then a lot of people are too afraid to go out shopping or to entertainment.
That is why Sweden’s economic downturn is similar to Denmark’s — despite Denmark having lockdown and Sweden having relatively light restrictions,” he said.Mr Robertson said the biggest risk to New Zealand’s recovery was posed by the failure of some of its trading partners to tackle the spread of Covid-19. “It’s a game of two halves, to use a rugby analogy. In the short-term, New Zealand is better than was expected,” said the finance minister. “But the medium and long-term is more challenging and we put that very squarely at the feet of the global economy.”
