Public Policy Prescription For A Pandemic

Mixing the New Zealand Initiative’s research with ideas from dozens of the largest Kiwi firms, the think tank has produced a comprehensive touchstone document on the best range of Covid-19 policy responses.

Written by the Initiative’s chief economist Eric Crampton, with research assistance from Leonard Hong, Effective Treatment: Public policy prescription for a pandemic warns that without sound, quick and careful policy adjustments implemented by the Government, New Zealand risks slipping into a deep recession.

“Unless effective treatment for the novel coronavirus Covid-19 emerges quickly, the world faces not only misery but economic depression. New Zealand will be immune to neither. The uncertainties of the pandemic will compound the normal economic uncertainties of a downturn,” Dr Crampton said.

He said the Government must directly boost capabilities in the health sector while providing the kind of appropriate economic support for a temporarily self-isolating and shuttered country.

“However, uncertainty about the duration of the crisis makes deciding on the most suitable policy difficult,” Dr Crampton added.

The Government has already enacted a wage subsidy scheme to support struggling Kiwis suddenly out of work and avoid companies collapsing from lack of revenue during the mandatory lockdown weeks. It has kept essential services open.

The 17-page report suggests a range of useful measures the Government could adopt either as compliments to its existing approaches, or as upgrades.

Dr Crampton suggests boosting the health sector’s equipment and capabilities by putting out a broad call for assistance from anyone with sufficient medical expertise. Many other ideas are included, such as:

• Continue and enhance the Government’s methods of wage support to help protect the most vulnerable New Zealanders;
• Adopt a similar model to Germany’s short-time work support policy so that firms do not have to lay-off large swathes of their staff;
• Combine the 2019/20 tax years and temporarily suspend PAYE (pay as you earn) collection;
• Modify the student loan programme to help bridge any income gaps among students;
• Suspend all non-pandemic related regulatory changes.

“The Government should also borrow the funds it needs to get through while maintaining its disciplined approach to spending lines not related to the pandemic."

“We have made earlier drafts of this report available to Ministry officials, to Minister Robertson, and the Opposition,” Dr Crampton said.

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Effective Treatment: Public policy prescription for a pandemic is available here.

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