- There are similarities between the global spread of COVID-19 and the 1918 influenza pandemic
- Our response to the COVID-19 pandemic will have intergenerational costs and therefore the recovery and rebuild should provide intergenerational value
- An innovative Budget should address climate change, the shift to a sustainable economy and financial system, healthcare, housing, the adoption of digital technologies and the quality of education
Today, we are eager to say we've learned something from history. If we have, then next week's Budget is a great place to show that.
The similarities between the global spread of COVID-19 and that of the 1918 influenza pandemic (known best as the Spanish Flu) are perhaps too close to ignore. At that time, the world was only beginning to understand the consequences of a world war and as the armed forces returned home, they brought something else with them.
The post war societies were ill prepared for a pandemic of this scale. Populations emerging from wartime living were weaker and more susceptible to infection, governments had been more preoccupied with military policy and media censorship was still rife.
Panic ensued as countries tried their best to enforce some form of lockdown and millions perished both from the disease itself as well as complications that it brought with it. The pandemic lasted years and the economic consequences included unemployment, increased use of welfare and lower productivity and output.
New Zealand fared much the same as the rest of the world. Our geographical isolation and size, which can help to protect the population from such global outbreaks, also increases our reliance on the global economy.
The "Recovery Budget"
Finance Minister Grant Robertson has already indicated that the resource allocation decisions which underpin the budget have been and will be made "through the lens of the intergenerational wellbeing of our people and with the long-term adjustments we need to make in our sights".
This forward-looking approach is what we need, but as is the case with all rhetoric, the devil will lie in the details. Our response to the COVID-19 pandemic will have intergenerational costs and therefore it’s imperative that the recovery and rebuild provide intergenerational value.
Ahead of the reveal of the recovery package, different interest groups have come forward with their own recommendations as to where resources should be allocated. The Climate Change Commission has requested "[a]s the Government turns its mind to the economic recovery, we encourage you to put a climate change lens across the measures you choose to implement". Similarly, Infrastructure New Zealand's 10-point plan would enable the country to "tackle long standing, costly and damaging impacts from many years of high growth and weak investment".
These impacts are not just fiscal in nature. As Dr Ian Hyslop from the University of Auckland's Faculty of Education and Social Work noted, lockdown under Alert Level 4 (and similarly Alert Level 3) highlighted the "the strains on the many children and families who don't have the luxury of material security: warm homes, possessions, savings and middle-class social capital". BERL, an economic think-tank, recognises that "should infrastructure be neglected now, the population of young Māori [in particular] will bear more of the load of restoring, repairing, and overhauling infrastructure and our communities in the future".
In December, Robertson confirmed New Zealand's Wellbeing Budget priorities for 2020 would remain Just Transition, the Future of Work, Māori and Pasifika outcomes, child wellbeing and physical and mental wellbeing. He also indicated major investments in health, education, housing and social programmes to address New Zealand's long-term challenges. Clearly these priorities remain absolutely critical for focus and next week's Budget represents an opportunity to take a significant leap towards creating the New Zealand of 2050.
A forward-looking and innovative Budget should ideally seek to address areas such as our response to climate change, the shift to a sustainable economy and financial system, healthcare, housing (and more broadly, the quality of our housing), the adoption of digital technologies and the quality of education.
Emphasis needs to be placed on creating generational and resilient infrastructure. While 'shovel-ready' projects can be a method for stimulating the economy, focusing spending on immediate short-term recovery will only serve to hinder the nation's survival through future economic shocks and create further intergenerational burden. As the Productivity Commission noted in their recent report on the future of work and technological change, "building the resilience of workers and the wider economy to economic shocks is of enduring importance".
This quest for prosperity would create a platform for long term economic competitiveness on the global stage. The Treasury’s Living Standards Framework established in 2011 and the previous ‘Wellbeing Budget’ are two instances where our governments sought to recognise the importance of non-financial outcomes. Now is not the time to slip back to focusing on economic outcomes measured by short-term GDP movements.
Whether we succeed in our quest for prosperity may be a better question for future commentators. Regardless, next week's Budget is a good place to start laying the foundation for the New Zealand of 2050.
Submission on Budget Policy Statement 2020
Chartered Accountants ANZ’s submission to Budget Policy Statement 2020.Read More
Quest for prosperity
Chartered Accountants ANZ’s paper on New Zealand’s prosperity. How can New Zealand keep living standards rising for all?Read More