The finance minister spoke to Auckland businesspeople today on the state of the economy a year after Covid-19 landed, and how he hopes to take on another crisis. Toby Manhire went along.
Virtual presentations in place of in-the-flesh speeches have become commonplace in these pandemic days, but it wasn’t Covid that forced Grant Robertson to deliver his Auckland Business Chamber address via Zoom this afternoon. It was something altogether more timeless: a blanket of fog across Wellington airport.
His flight cancelled, the finance minister spoke to the business lunch instead from the big screen at the Cordis Hotel. He began by recalling the speech he’d given at the same business lunch a year earlier. On February 27, 2020, Robertson had addressed the gathering global clouds of Covid. He’d warned that there was “a high probability that we will have a case at some point”. In fact, unbeknownst to him, the first case had arrived already, and tested positive the next day. “It’s been quite a 364 days,” he said today. It really has. From my notes from that day, there are jottings about one of the most pressing economic questions of the moment: what does it mean for the live rock lobster industry?
What he didn’t remind the audience of was where they’d gathered for the speech those 364 days earlier: the Pullman Hotel, which of course went on to become a Covid isolation hotel, and a Covid incubator.
A year ago Robertson laid out the three scenarios for which they were planning. The first, he said then, “predicts a temporary global demand shock where we experience a temporary but significant impact on the New Zealand economy across the first half of 2020, before growth rebounds in the second half as exports return to normal”. The second was “a longer-lasting shock to the domestic economy, as the global impact feeds through to the economy for a period of time, and where there are cases in New Zealand”. And the third “is planning for how to respond to a global downturn if the worst case plays out around the world, and we have a global pandemic”.
Today he said: “I was being advised that the first two scenarios were possible, and the third was highly unlikely.”
In the days that followed, that changed about as quickly as imaginable. Scenario three became inevitable. The plan meant fiscal stimulus on a vast scale, measures which, together with the health response, meant the country was today in “reasonably good shape”, said Robertson. There was, he said, “light at the end of the tunnel”.
The question that lingered: how far away is that light? Michael Barnett, CEO of the Auckland Business Chamber, pressed Robertson on plans to help exporters. With freight costs up as much as 200%, labour costs increased and the exchange rate having spiked, “all of these things are frustrating an export sector that has protected New Zealand over the last 12 months”, he said.
Franz Mascarenhas, who runs the Cordis, asked the deputy PM about the plans for a trans-Tasman travel bubble. Robertson could offer nothing specific. “We continue our discussions with our Australian friends,” he said. “I am confident we will make progress over the coming months.” He understood the desire to see border restrictions lifted, and he was as eager as anyone. But the economic recovery depended, he reiterated, on the public health priorities.
Robertson noted the gravity of the climate crisis and the Climate Change Commission roadmap – “one of the most important moments of my political life” – but it was another urgent, profound challenge that occupied the second part of his speech. Housing.
When the wonks did their work on the impact of Covid, Robertson recalled, the forecasts were that house prices would take a hit. That had, of course, been “blown out of the water”, with the median house price across New Zealand leaping by around 20% in a year.
There were plans in motion to tackle what was undeniably a “crisis” of its own, he said. The RMA overhaul was critical. Just yesterday, he’d formally directed the Reserve Bank to take the state of the housing market into consideration when it moved the official cash rate.
The challenge, he said, was to “tilt the balance in favour of first home buyers, and away from speculators”. I have no doubt that the audience today was filled more of the second category than the first. But few would have quibbled with the idea that the trajectory of house prices is a thorn in the side of the economy. I recall Shane Jones, then minister for economic development, telling a similar business lunch in Auckland a couple of years ago, his chest pumped and proud, that his NZ First Party had helped them out by killing the capital gains tax. God forbid anything might stand in the way of rampant house price inflation.
You’d be hard pressed, however, to find anyone that seriously thinks the state of the house market in New Zealand today is anything but calamitous. Glaring down from the big screen, Robertson didn’t shrink from the word “crisis”. He promised that we should expect “a package of further measures” and “coordinated and enduring action”. He said: “We have to confront some tough decisions and we will do that in the coming weeks”.
Jacinda Ardern and Grant Robertson have shown the ability to take bold action before. They’ve also shown a willingness to tinker around the edges. Which approach this time? Seems like we’re about to find out.