IN A NEW WORLD, NEW THINKING IS REQUIRED WHY THE PRIORITIZATION OF RESOURCES IS CRUCIAL TO NEW ZEALAND'S ECONOMIC RECOVERY IN THE WAKE OF COVID-19

Roger Douglas and Robert MacCulloch
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Roger Douglas: The Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise

No 155, Studies in Applied Economics from The Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise

Abstract: The Covid-19 outbreak has not only precipitated a health emergency, but also an economic crisis, unparalleled in modern history. For New Zealand to emerge from that crisis in a relatively healthy state, the Labour government will need to provide a clear framework for recovery, implementing policies which clearly prioritize those most affected by the societal and economic lockdown necessitated by the outbreak. To date, such prioritization has been lacking, with the Wage Subsidy Scheme unfairly advantaging big business and the professional elite, at the cost of money and resources which could have been better directed towards assisting the newly unemployed – namely workers, their families, and small business owners. Ultimately, poorly targeted support in the form of helicopter payments, wage subsidies, or broad-based tax cuts (such as a moratorium on GST) is wasteful, and will only serve to entrench inequalities that existed prior to the pandemic. Equally, the time and costs inherent in planning large-scale new infrastructure projects – and the fact that they offer little practical help to the majority of workers who require help now – means that they should not be regarded as a panacea, aiding economic recovery. Instead, clear, innovative policies, which not only prioritize those most in need, but which also lay the groundwork for further social and economic reform in the medium to long term, are required. For workers and their families, support can be offered via the mechanism of special risk accounts, tailored to meet their individual needs. For small business, help can be provided by facilitating conversations between businesses, landlords, and banks, as well as providing – upon the provision of an approved business plan – forgivable government loans. Finally, to help manage the recovery, and ensure our younger generations are not saddled with debt, the government must also identify, and eliminate, unnecessary spending, privilege, and waste. It can find an extra $15 billion per annum by doing so, contributing to the recovery in the short term, and – more generally – to implementing wider scale reform once the immediate crisis has been put behind it.

Pages: 14 pages
Date: 2020-05
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