With mass unemployment coming, some existing benefit rules are going to exacerbate people’s problems.
The size and suddenness of the Covid-19 shock has highlighted just how far New Zealand has allowed its welfare system to run down. The government yesterday announced extensions to its wage subsidy scheme and that it is “expediting urgent work on new income support measures for all workers”. But the “urgent work” will need to be fundamental and very large to address the holes in our welfare system. It needs to look far beyond the immediate four-week lockdown period and should have three objectives:
Stimulating domestic demand by providing households with the spending power that will keep businesses going and people employed
Keeping workers linked to their employment as far as is possible
Ensuring the welfare system provides adequate income for all, especially those who lose jobs
Let’s look first at the likely employment and unemployment impacts of Covid-19. Even on the most optimistic scenario where the move to Level 4 prevents a rapid growth in coronavirus cases the employment impact will be large and long-lasting for many sectors of the economy. The causes and dynamics of the global financial crisis (GFC) were totally different so comparisons should be treated cautiously, but it seems inevitable that the rise in unemployment will be greater this time than then. It is quite possible we will see an increase in unemployment as large and as rapid as occurred in the late ’80s/early ’90s when the unemployment rate doubled to over 10% in little more than two years.
More importantly, the burden of recessions and unemployment is never shared equally. The aggregate unemployment rate peaked in the GFC at 6.4%. But for those aged 16-25 it reached 17%; for Māori, 14%; and for Pasifika 15%. At the height of the Rogernomics/Ruth Richardson-era, unemployment reached 11.4% nationally, but it was 21% for young people, 28% for Māori, and 30% for Pasifika. Given the heavy impact this time around on the hospitality and tourism sectors, it is likely that young people, who make up a disproportionate percentage of those sectors, will be especially hard hit by job losses.
The government’s extension of the wage subsidy scheme to large firms is welcome, but the design of the scheme must be changed. In fact, it is not a wage subsidy scheme at all, but a business subsidy scheme. In times like these, business subsidies are not a bad thing, and the money will help keep some businesses afloat. However the scheme’s linkage to employment is far too tenuous to describe it as a wage subsidy and its impact on the number of jobs saved is highly uncertain. At present an employer must promise “on their best endeavours” to keep staff on and they then receive the full eight-week payment upfront. It would be better to link it directly to the ongoing payment of wages. Administratively that is slightly more work, but the systems already exist through Inland Revenue to do it. Once linked to wage payments, there is a strong case for extending the duration well beyond the eight weeks, and possibly also raising the subsidy rate, which currently equates to 50% of average weekly earnings. That is considerably less, for example, than the UK scheme’s cap of £2,500 per employee per month.
At the same time, officials need to be working on something akin to the old Project Employment Programme, or PEP scheme, under which employers and community groups get a wage subsidy for setting up limited term projects of community value. Obviously this is not feasible during Level 4 lockdown, but it could be a valuable way of supporting employment after that.
Business and wage subsidy assistance can help keep people employed but the reality is many people will either lose their jobs or be unable to find work. So what should the government be doing as far as income protection goes? I suggest four urgent changes that could all be implemented immediately:
Increase all core benefit rates by at least 50%
If arch-Conservative Australian prime minister Scott Morrison thinks it is necessary to double benefit rates – adding an extra $225pw to all rates – we are way behind the game with a $25 increase that represents something between a 6.4 and 10% increase. Even a 50% increase would not prevent an increase in poverty rates, but it would go a long way. It would also act as a fiscal stabiliser boosting household spending, which will be critical especially after the initial four-week closedown. Implementation time: one week. MSD has systems to adjust rates each year from 1 April. They only need to be told what the new rates are to be.
Give the extra $72.50pw In-Work Tax Credit to benefit recipients
Thankfully, it looks like kids are spared from this disease, but they will not be spared from the poverty it causes. At the moment a family that has to go on benefit gets to keep their Family Tax Credit but loses the In-Work Tax Credit. Giving $72.50 a week less in Working for Families support to the poorest families because they are on benefit never made sense, but is completely crazy now. In the package last week Government dropped the minimum hours worked test for the In-Work Tax Credit but retained the ‘off-benefit’ rule. That should be removed too so that everyone eligible for Family Tax Credit gets the extra $72.50.
Implementation time: about 24 hours. These families already get the Family Tax Credit, all that is required is to add in the extra amount.
Individualise benefit entitlements, rather than assessing them on a couple-basis
Most low- and middle-income families rely on two incomes. In-work poverty among couples with children is low where there are two incomes, but high where the family only has one. The way our current benefit rules work, if one earner in a two-income couple loses their job they are entitled to little or no benefit because of the partner’s earnings. Over the coming months, we are going to see thousands of couple families lose at least one of their incomes. A more targeted way of doing this – and one which should be a permanent change – is to disregard the first $50,000 or so of a partner’s annual income for assessing entitlement. Disregarding the partner’s income up to the average wage is a simple, effective way of protecting these families.
Implementation time: one week for new applications, a few weeks to re-assess existing cases.
Cease applying the relationship status rules
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Now is not the time for Work and Income to be cutting off people’s benefit on the grounds that they have entered a relationship. Frankly, if a person is helping cover a sole parent family’s living costs, they are doing no more than following the PM’s plea to ‘be kind’. It would be nonsensical to then cut the family’s benefit because they are deemed to be ‘financially interdependent’.
Implementation time: 5 minutes. Just stop doing it.
Not only would these changes help protect the incomes and living standards of those who lose employment, they would also provide a crucial fiscal stimulus helping support economic activity which, in turn, will help maintain jobs. Time will tell how much more will be necessary over the next 12 to 18 months, but the government’s urgent package to be announced in the next few days needs to include measures like these immediately if we are to mitigate some of the worst employment and welfare impacts Covid-19 will bring.
For all The Spinoff’s latest coverage of Covid-19 see here. Read Siouxsie Wiles’s work here.
New Zealand is currently in alert level three. As of 11.59pm on Wednesday we go to level four: the country shuts down, apart from essential services. For updated official government advice, see here.
The Spinoff’s coverage of the Covid-19 outbreak is funded by The Spinoff Members. To support this work, join The Spinoff Members here.
9.45pm: ‘Essential services’ guidelines clarified
The greatest puzzle of pre-shutdown New Zealand has been solved: the Warehouse must close its doors. Liquor stores will need to shut, too, with the exception of trust areas in which booze is not available in supermarkets. There it will be one in, one out. “Big box” retailers such as Mitre 10, Placemakers and Bunnings will be open for trade customers providing for essential services only, as a “key part of the supply chain”. Sausage sizzles are out.
Dairies can stay open as long as they adhere to strict physical distancing rules. Food box and bag companies are OK.
Dominos Pizza appears to be a no-go, despite their insistence they’ll be in business.
“Only the businesses absolutely essential to ensure the necessities of life, like supermarkets and pharmacies, can stay open. If in doubt, the business premises should be closed,” said Paul Stocks, deputy CEO at MBIE.
“Food delivery services like Uber Eats and Deliver Easy pose a risk to human health. We cannot guarantee every kitchen operates strict food preparation controls or that everyone who works in a kitchen is well. Evidence overseas suggests the virus has been spread via poor food hygiene practices, so it’s a real risk we have to eliminate,” he said
“For clarity, every restaurant, café and bar must close all aspects of their operation, including delivery. Delivery of food that is not pre-cooked will be allowed under strict health conditions. Many New Zealanders now receive their food via a delivery company and are in effect no different to a supermarket delivery option.”
On dairies he said: “Dairies provide basic food items like bread and milk to people close to where they live, especially the elderly who may not be able to get to a supermarket. However, they will need to operate a strict ‘one-in one-out’ policy and they won’t be allowed to sell food prepared on the premises.
“If any dairy breaks the rules, we will shut it down. If there is evidence of systemic abuse, we will remove them from the essential services list.”
On alcohol sales, this is the ruling: “Most people are able to purchase alcohol at supermarkets. On that basis liquor stores are being treated as other non-essential retail outlets and must close. The only exception to this are Licencing Trust Areas where there is nowhere else to purchase alcohol. These stores must operate a ‘one-in one-out’ policy.
“We are doing further work on online ordering of non-food products for home delivery to see if this type of retail can be conducted safely. We will update advice on this once further decisions are made.
“Covid-19 alert level four is not business as usual and means there will be significant restrictions on what New Zealanders are able to purchase. However, these changes are essential to stop the spread of the virus. We are ready to change the list if necessary. If we discover there are essential services that have not been made available we will react to that as we go.”
8.00pm: The day in sum
Director-general of health Ashley Bloomfield announced 40 new confirmed Covid-19 cases today and three probable, bringing the total to 155. Recent travel remained the “main driver” of newly reported cases. Four cases are being classified as community transmission, doubling from two (three in Auckland, one in Wairarapa).
The minister of foreign affairs, Winston Peters, advised New Zealanders overseas to consider staying where they are and “sheltering in place”.
Prime minister Jacinda Ardern emphasised the importance of reducing contact between people to the bare minimum.
The minister of finance, Grant Robertson, announced the government has agreed with retail banks a mortgage repayment holiday scheme for mortgage holders affected by the Covid-19 crisis.
Robertson also announced a business finance guarantee scheme that will provide short-term credit to cushion the financial distress on solvent SMEs affected.
The domestic travel deadline was extended to midnight on Friday after ferry services were inundated with people trying to get home before New Zealand enters alert level four tomorrow night.
Confusion persisted around which businesses will be allowed to continue operating during the lockdown, with the government suggesting it was unlikely The Warehouse would stay open, despite the company’s earlier claim its stores would be operating as “essential services”.
Three more cases from Auckland’s Marist College were confirmed, bringing the total to four.
6.45pm: Three more cases from Marist College, bringing total to four; Family Court releases guidance for shared custody arrangements
Following a staff member testing positive for Covid-19 on Sunday, three more cases from the Auckland school have been confirmed today, reports RNZ. In a letter to parents, the school says all staff and students of the school of about 800 girls are now considered close contacts. It’s not clear if the three cases confirmed today are students or staff members.
Meanwhile, principal family court judge Jacquelyn Moran has released guidance regarding the care arrangements of children subject to Family Court orders during the lockdown period. Children can continue to go between two homes within the same community, provided no one in either home is sick or has been in contact with someone exposed to Covid-19 or who has been overseas.
However, “where there is a shared care arrangement and the families are in different towns or communities … the safety of the children and others in their family units should not be compromised by movement between those homes, particularly if there are more than two homes involved,” says the guidance. “Where children cannot move between homes, the Court would expect indirect contact – such as by phone or social media messaging – to be generous.”
6.25pm: Confusion around whether businesses can open remains
Alan McDonald of the Employers and Manufacturers Association (EMA) says if it isn’t made clearer what an essential business is, businesses will make the call themselves and open. McDonald told Checkpoint he was receiving more than 250 calls a day from members of New Zealand’s largest business association seeking clarification about whether they could continue operating once New Zealand enters lockdown, alert level four, tomorrow at 11.59pm.
A free 0800 number that businesses could call to seek clarification was initially planned to be listed at 5pm today, but at the time of writing it doesn’t appear to be available.
Earlier today, The Warehouse announced its stores would open during the four-week lockdown period but it now appears unlikely (see updates at 10.32am and 1.45pm).
Meanwhile, the Restaurant Association is seeking clarification around food delivery. Takeaway services are allowed to remain operating until the country transitions to level four tomorrow night, but “food delivery” – including food kit services like My Food Bag and Hello Fresh – are allowed to continue operating throughout the lockdown. Restaurant Association CEO Marisa Bidois told RNZ the government needs to provide clarification as to whether that includes restaurants using delivery services. “People still need to eat, and we think our industry can contribute to assisting local communities and essential service staff.”
Restaurant Brands told RNZ that Taco Bell and Carl’s Jr branches were closing this evening, and the closure of KFC and Pizza Hut stores was being staggered. Domino’s plans to operate throughout the lockdown, and is offering those aged over 70 one free meal delivered per week.
5.50pm: Domestic travel deadline extended; Bridges to chair committee to scrutinise Covid-19 response; Robertson discusses government spending
The deadline for New Zealanders to get home from other parts of the country has been extended until midnight on Friday. Domestic passenger services, particularly ferries,have been inundated with people trying to get home before the original cut-off date of midnight Wednesday for non-essential workers, with a decrease in passenger numbers to accommodate physical distancing measures exacerbating the issue. Transport minister Phil Twyford announced the extension this evening.
Meanwhile, the opposition leader Simon Bridges will chair a cross-party committee to scrutinise the government’s response to Covid-19. Parliament will adjourn for almost five weeks after urgent business is dealt with tomorrow. It had technically been in recess this week, but tomorrow afternoon will be recalled to put the country into a state of emergency and establish the lockdown.
Finance minister Grant Robertson says the government is taking on the bulk of the credit risk in the $6.25 billion finance guarantee scheme announced today (see 3.15pm update) to make sure “money gets to businesses that need it. The risk we had in putting too much risk on banks is that they would apply too much traditional lending criteria,” Robertson told RNZ’s Checkpoint. “We want to open that up a bit so the loans are approved.”
Responding to Lisa Owen’s query about whether he was encouraging banks to give more people a crack than they normally would and “push the boat out a bit”, he said, “Yes, because these are extraordinary times. Good businesses that employ lots of people could be losing jobs if we applied too strict rules.”
In response to the suggestion the government was “spending up a storm”, Robertson said, “You’re not wrong, Lisa, but if you look around the world, this is what governments everywhere are doing. This is the rainy day. We’ve got room on our balance sheet to be able to do this.”
Robertson said 117,273 wage subsidy applications from Covid-19-affected employers had been made since the scheme was launched a week ago, with 41,505 approved so far. He said $687 million had been paid out but there was “a lot more to come”.
4.45pm: Supermarket staff facing abuse
Supermarkets continue to be overrun, and after an awful day yesterday, today was worse, Countdown’s, Kiri Hannifin has just told RNZ. There had been widespread “abuse of staff”, she said. “They’re putting up with terrible behaviour. It’s not on and it’s not fair. We’re better than this … It makes my heart very sore.”
It was clear, she said, that the “message isn’t getting through” about stocks being plentiful. The stores were introducing a range of measures to ensure the safety of the physical premises. She urged people to hold off the online shopping in favour of vulnerable people who had no alternative.
4.40pm Beware Covid-19-related online scams, bank says
With home internet use set to rocket during the shutdown period, people should be on the lookout for online scams exploiting their fears about the Covid-19 pandemic, BNZ has warned. The bank says it has seen a rise in Covid-19 phishing emails in recent weeks, including one purportedly from the World Health Organisation offering coronavirus information that, when clicked, installs malicious software. Another online scam offers a “Covid-19 infection map” application that claims to track the progress of the virus around the world. When installed, it steals passwords and other sensitive information.
While most people will have experienced a surge in Covid-19 emails from companies where they are a customer, those companies should never use those emails to ask for personal information. “If they do, that’s a huge red flag,” said Ashley Kai Fong, BNZ head of financial crime.
3.15pm Jacinda Ardern and Grant Robertson speak to the media
The PM has emphasised the importance of reducing contact between people to the bare minimum, and spoken of the sacrifices all New Zealanders will have to make over the coming weeks. “This is life that will be different. It will not be normal. It will not feel normal.”
She said she’d been asked if people could leave their houses to go for a walk. They could, she said, but should remember to stay two metres away from others as they pass, and to never congregate with others. At the supermarket, people should also make sure they stay two metres away from other shoppers. Playgrounds should not be used.
“The simplest thing people can do to stop the spread of the virus is to stay home. Isolation and physical distancing is key. Every interaction we have with someone else increases the risk of the spread of the virus. You’ll see a cluster of cases have come from one conference – that’s a little bit of insight into what we’re trying to stop.”
Parliament will sit tomorrow to debate an epidemic notice and introduce a State of Emergency, she said. The epidemic notice will allow visitors with visas due to expire during the shutdown to apply for extensions.
The minister of finance, Grant Robertson, announced the government has agreed with retail banks a mortgage repayment holiday scheme for mortgage holders affected by the Covid-19 crisis. Details will be released shortly.
He also announced a Business Finance Guarantee Scheme that will provide short-term credit to cushion the financial distress on solvent SMEs affected. The scheme will include a limit of $500,000 per loan and will apply to firms with a turnover of between $250,000 and $80 million a year. The loans will be for a maximum of three years and are expected to be provided by the banks at competitive, transparent rates, he said.
The government will carry 80% of the credit risk, with the other 20% to be carried by the banks.
Asked about New Zealanders’ increasingly desperate attempts to get home, Ardern said that the window for those overseas was closing. “Going forward there will be be people who we simply won’t even through our best efforts be able to bring home,” she said.
Earlier today the foreign affairs minister, Winston Peters, said that New Zealanders still stuck overseas should make arrangements to stay where they are until the crisis has passed.
Ardern urged people within New Zealand seeking to travel home by plane or ferry to remain “patient and calm”, and suggested there would be flexibility if absolutely necessary around the 11.59pm cut-off tomorrow.
“We accept that we’ve got to get people back to their place of residence, so we will work through that backlog.”
A question was asked about the availability of drive-thru takeaway food for those without cooking facilities or who could not cook themselves. “I think what people have to remember here is that it’s not just about whether or not you’re having a contactless experience in your pickup, but the fact that everyone in that restaurant is having contact with one another,” she said.
“We’ve got to reduce down as many opportunities as possible for people to have contact and food preparation is a particular area of risk. It’s the simple principles of essential services – access to food, for example if there’s no supermarket in your town, food provision through small local superette.”
However, she said meals on wheels and other food delivery services for older people will be available to those who were using them previously.
Ardern said people should not expect the impact of the level four lockdown to be reflected in the number of positive cases for as long as 10 to 12 days. For now, the numbers of confirmed cases “will continue to grow. People should not be alarmed if they see that.”
She said it was imperative that people stuck to their “bubble” – the very small group of individuals one lives with or has essential contact with.
“Whatever your bubble is for the month is the bubble that you must maintain. That has to be it. As soon as you start opening up contact with different individuals, if that person did the same with their different individuals, that’s when the risk grows.
“So I’m asking people to just apply common sense and common principles. The same small group has to be your bubble for the month. If that means that you’re a couple that is split up, you’re each other’s bubble, and shared care with your children. That’s it. That’s your bubble. Apply common sense, keep your distance from anyone outside of your bubble and that’s how we’ll get through this.”
2.35pm Government advises New Zealanders overseas to shelter in place
The minister of foreign affairs, Winston Peters, is now advising New Zealanders still overseas to consider “sheltering in place” – staying where they are – rather than attempting to come home. “Since 18 March, we have been warning New Zealanders offshore that the window for flying home was closing. A week later, it has now almost completely closed,” he said.
It is now extremely difficult to fly to New Zealand, he said, and those who find themselves stuck should now focus on staying safe where they are.
“Those few Kiwis who still have the option to return to New Zealand should continue to work with their airlines to seek flights as a matter of absolute urgency.
“The feasibility of government-assisted departure flights is being considered, but there are no guarantees these will be possible in the extremely complex and rapidly changing global situation,” Peters said.
He said the government remains committed to helping New Zealanders overseas and consular assistance will be provided wherever possible. All New Zealanders overseas should register their details on SafeTravel, and review the website regularly for the most up to date advice for New Zealanders overseas.
2.30pm Warehouse temporarily halts trading on NZX
The Warehouse Group is currently in a trading halt, according to an announcement from the NZX50. Earlier in the day, the company told the market that its stores would remain open over the four week shutdown period, as a supplier of “key consumer goods”. Its share price rose 41c in the aftermath of that announcement. However, at a press conference earlier this afternoon, an MBIE spokesperson poured cold water on any certainty that Warehouse stores could remain open, saying only that no decision had yet been made.
“I would caution firms about leaping to judgement about what their status will be”, said the spokesperson.
1.45pm: Essential service category update
Earlier today The Warehouse said it would remain open (see 10.32am) as an essential service.
Not so hasty, Paul Stocks of MBIE has just said.
“If you’re in doubt about whether you’re an essential service, you’re probably not,” he said. “I would caution firms about leaping to judgement about what their status will be.”
He added: “The essentials of life, and that includes supermarkets, will remain open. There will be an ongoing supply of food and essential supplies. Supermarkets are already taking steps to ensure people can self-isolate while shopping … and we’re looking to do online contactless deliveries.”
Was the Warehouse a necessity of life?
“I don’t think any particular firm is a necessity of life. The goods that they supply might be. We’ll have to think about how they are supplied to New Zealanders.”
What about those who don’t have a car? “We’re working through the transport operators now where you can safely self-isolate. For example, if you’re taking a taxi, you should sit in the back seat … Public transport will remain open for essential services workers.”
Dairies? Bakeries? Butchers? “Around the country there are different circumstances for different communities. We want to make sure all communities have access to food and essentials. Whether that is through a small supplier or a large supplier is not the key test, it’s how we make that available. So we’re working through that now.”
They’re also still working through questions around liquor stores.
Details would continue to be updated, and an 0800 number would be in action from 5pm.
1.30pm: Childcare guidelines for essential worker parents
Iona Holsted, the secretary for education, noted that some parents, such as health workers, would need to find a child carer. That carer would become a “trusted buddy” who is identified as part of the self-isolated group (though must not be elderly or vulnerable). “It is critical that that buddy cannot then have other contacts other than your own household. You all become one group … the smaller the better.”
The Ministry of Education was busy working to set up remote learning systems, said Holsted.
On questions around whether education provision would exacerbate inequities, Holsted said: “A situation like a pandemic reveals the inequity in our system. It doesn’t create it. Many, many children in this country suffer from poor learning outcomes because of where they live and the lack of support they have. This might be an opportunity to give them more resources.”
1.20pm: 40 new confirmed cases, taking total to 155
There are 40 new confirmed cases and three probable, says Ashley Bloomfield, director-general of health. That brings the total (which will now include probable cases, in which clinicians judge that a person had Covid-19 symptoms) to 155.
Recent travel remains the “main driver” of newly reported cases. Four cases are being classified as community transmission, doubling from two.
Three of the cases are in Auckland, one in Wairarapa.
More than 900 tests were carried out yesterday bringing the total number of completed tests to 8,300.
There are 12 recovered cases. There are six people in hospital and all are stable. No confirmed cases of Covid-19 have to date required ICU care.
Bloomfield said he was unaware of any cases among health care workers, but confirmed there was one in a rest home. The other staff were “being looked after in what you might call a bubble, to ensure they are strictly self-isolated and being monitored”.
On the question of protective equipment, Bloomfield said there was sufficient stock, and in the case of masks, “millions more are being produced”.
Addressing the shift to alert level four and a lockdown, Bloomfield said: “There is a clear consensus among public health professionals, scientists … that it is better to do this sooner rather than later and gives New Zealand the best chance of breaking the chain of community transmission. This will require all our efforts, and I strongly urge all New Zealanders to play their part.”
There will be new, stricter rules about visitors at hospitals rolling out, he said.
Introducing today’s briefing the all-of-government controller in the Covid-19 response, John Ombler, said their actions were “unprecedented”. As of 11.59pm tomorrow, “people must stop interaction with others outside their household,” said Ombler.
He said New Zealanders were now being asked to make plans “in case they cannot find flights home”. They should not reply on government provided flights, he said.
12.00pm: Midday update
Jacinda Ardern has signalled that the government will work with banks to ensure no one loses their home as a result of the Covid-19 crisis. She also indicated that there would be a plan for border quarantine measures coming within 24 hours.
Pressure is mounting on transport networks to get people home in time for the lockdown. There are reports of crowds for ferries and people struggling to book flights in the next 36 hours.
With 36 hours to go, queues are winding around supermarkets and a range of other stores. Note: supermarkets will remain open. And they have plenty of stock.
Donald Trump and Boris Johnson have issued contrasting statements. The American president is talking about resuming business in a few weeks, while the British prime minister has announced that the country will be going into near-lockdown for three weeks.
President Donald Trump has been speaking in recent minutes, declaring that “America will again and be soon open for business,” saying it would not take the three to four months some had suggested. “Our country was not built to be shut down,” he said. “This is not a country that was built for this. It was not built to be shut down.”
Parroting a line that has been aired in recent times on Fox News, he said: “We’re not going to let the cure be worse than the problem.”
Back home, Carmel Sepuloni says 53,000 applications for wage subsidies have been made so far. The social development minister told RNZ around $280m has been paid as of yesterday. The subsidies are for businesses that are seeing a 30% drop in revenue compared to the same month last year.
There are queues outside shops around the country this morning. Most, in accordance with the alert level three rules, are observing physical distancing in those queues. Among the retailers with lines of people curling around them is Gun City in Penrose, the New Zealand Heraldreports.
10.50am: Briefing today at 1pm
A big lineup at today’s media briefing, which is coming from the Beehive at 1pm. As well as the familiar face of Ashley Bloomfield, Director-General of Health, there will be the All of Government Controller John Ombler with an update on Covid-19 national response, Iona Holsted, the Secretary for Education, and Paul Stocks, Deputy Chief Executive MBIE with an update on essential services. We’ll bring you updates as soon as they happen.
Meanwhile Auckland Council is holding an emergency meeting to confirm decision-making arrangements during the Covid-19 crisis lockdown at noon. That will be livestreamed here. And an announcement has been made that all construction on the City Rail Link will pause for the duration of the shutdown.
10.32am: Warehouse to remain open
In an announcement to the sharemarket today, the Warehouse has confirmed that they will remain open for the duration of the shutdown, reports Stuff. Customers will be instructed to follow social-distancing protocols, and new provisions around staff safety will be put in place. The store is allowed to remain open on the grounds that it is a provider of key consumer goods.
9.40am: Britain steps up restrictions
Britain has ramped up towards a full lockdown. Speaking a moment ago from No 10, Boris Johnson announced that no one should leave home unless for shopping for basic necessities, exercise (once a day), medical needs, and travelling to or from work (“only where this is absolutely necessary and cannot be done from home”).
He announced that all shops selling non-essential goods must close immediately and all gatherings are banned. “If you don’t follow the rules, the Police will have the power to enforce them.”
At the time of writing, Britain has more than 6500 confirmed cases of Covid-19, with 335 people dead. The measures announced today follow the reversal of an initially disastrous policy direction, in which the aim was to build up ‘herd immunity’ among the population.
9.10am: Concern about crowds for Cook Strait ferries
The ferries will be closed to the public from the moment Level Four takes effect (11.59pm Wednesday night) and right now a lot of people are trying to get a last minute trip across, reports Radio NZ.
Police are asking people to disperse, and one would-be passenger said there had been no communication about what people should do now, even for those who held tickets. In the interview with Morning Report, the passenger said it was clear that sailings would need to take place after the restrictions come into effect, because otherwise many people would be stranded on the wrong island.
Other people are struggling to travel home in time for the commencement of the lockdown tomorrow night.
8.15am: IOC member suggests Olympics postponed to 2021
Veteran IOC member Dick Pound has told USA Today that the long-running saga over whether to postpone the Tokyo Olympics is nearing an end.
“On the basis of the information the IOC has, postponement has been decided,” Pound said in a phone interview. “The parameters going forward have not been determined, but the Games are not going to start on July 24, that much I know.”
7.45am: Ardern signals major government loan guarantees
In an interview with Morning Report’s Corin Dann, prime minister Jacinda Ardern has signalled that more huge economic interventions are coming. “We will go as far as we can”, she said, to ensure people won’t lose their homes and businesses. In addition to the mortgage announcements yesterday, she addressed “a business guarantee scheme to support lending [is] something we’re working through”. It suggests the government is willing to use its low levels of debt and incredibly powerful balance sheet to act as a kind of guarantor-to-the-nation, which would in theory unlock very low interest loans or repayment holidays for almost any business under pressure. “This is big stuff,” said Dann, correctly. Hamish Rutherford has more at the Herald (paywalled, worth it).
On the public health side of the equation, she remained at pains to make it clear that cases will rise, saying “it will get worse before it gets better”, but suggested our health system was well-placed to cope. “Of 102 cases, we have five in our hospitals,” she told Dann.
Speaking to TVNZ, Ardern said the returning New Zealanders remained “an ongoing area of vulnerability”. Of stricter quarantine measures she said: “I’ll say a bit more about that over the next 24 hours or so”. Meanwhile, during her interview with Mike Hosking on ZB, the focus was more on the nature of essential services – on why we weren’t following Australia’s lead and letting liquor stores and hairdressers stay open. “Hairdressers, for instance – that’s close physical contact,” she said, correctly.
Meanwhile, industry leaders are giving guarantees that essential logistical services will continue over the course of the shutdown, reports Radio NZ. Nick Leggett from the Road Transport Forum says work is underway to ensure the highest priority good get through.
The alert level system, outlined in yesterday’s Bulletin, was put into almost immediate effect. New Zealand is currently at a level three alert, elevated from the position it was at 24 hours ago. But the crucial part of PM Jacinda Ardern’s address to the nation was when she outlined the timeframe in which the country would move to level four – the effective shutdown level – and that it would last for a minimum of four weeks. It showed that for the last several days (and probably weeks) the government and public service have been working frantically to build up the country’s state of readiness for this moment. We’re now at a point where it can be done, and needs to be done.
Why does it need to be done? I’ll quote the PM’s speech here, because it really is very simple. “If community transmission takes off in New Zealand the number of cases will double every five days. If that happens unchecked, our health system will be inundated, and tens of thousands of New Zealanders will die. There is no easy way to say that – but it is the reality we have seen overseas – and the possibility we must now face here.” The number of cases jumped again yesterday, to 102 in total – and while many of those were still related to international travel, two cases are being treated as community transmission.
So what will the shutdown involve? The most important point to note is that essential services will remain open. That includes supermarkets, which will remain open for however long this lasts. Countdown corporate affairs GM Kiri Hannafin gave an emotional interview to Checkpoint yesterday, in which she urged in the strongest possible terms that people should shop normally. We aren’t going to run out of food, or essential supplies, so long as people don’t panic-buy and hoard. It really is that simple. If you don’t need to go to the supermarket today, wait a day or two for things to calm down a bit, so that the people who really do need to go today can do so. Pharmacies are also on the list of essential services, a full list of which can be found here.
In terms of how people should behave, you must limit your physical contact to only those within your household. That’s a really non-negotiable rule. You must also stay at home, unless it’s absolutely essential for you to leave the house. If you have to walk the dog or just get some fresh air, keep a safe distance from other people. If you have to go to the supermarket, follow all the social distancing protocols in place. If you have to go to the pub, tough luck, because they’ll all be closed. It’s a really difficult thing to get your head around, but we’re all going to have to do it. The cops will be enforcing it too, though commissioner Mike Bush said they’d be “encouraging and educating” the public before arresting them. Honestly, if anything that sounds more threatening, and I’ll definitely be staying at home constable, thanks for checking in.
What about schools? They’re closing too. Jihee Junn has outlined what it means for all sorts of educational facilities, from ECE up to universities, which will be closed from today. There will be exceptions made for the kids of essential workers, such as nurses and paramedics, but they will only last until the end of Wednesday. That doesn’t mean school’s out forever though – online and distance learning will continue for the duration of the shutdown.
To finish this section, things could get quite bad in the coming weeks. For a lot of people, they’re already really bad. But there are several possible scenarios of how things could go from here. If we all do our part, then it’ll be much less horrific than it could be. Time will tell if we’ve taken the right approach, but now that a decision has been made, we have to make it work.
I promised more than one extraordinary event took place yesterday – so here’s another thing that was previously unprecedented in New Zealand. The Reserve Bank has launched a programme of government bond purchases, also known as quantitative easing, reports Interest. It was one of several signs over the course of the day that the economic impacts of Covid-19 are looking worse than was expected this time last week.
Finance minister Grant Robertson also made some big moves, reports the NZ Herald. The cap on the wage subsidy scheme for businesses, which was originally $150,000 in total, has now been lifted entirely. The cost of the whole scheme is now expected to be about $9.3 billion, as much larger businesses will be able to apply for the whole 12-week period. A range of other criteria have also been heavily relaxed. Robertson also decreed a rent freeze, and are hoping to be able to extend no-cause evictions over the coming months, in order to protect tenants. Plans are also underway for a ‘business financing guarantee scheme’, and some sort of support for mortgage holders. To give an insight as to just how far Robertson is willing to go in this moment, he didn’t even rule out a Universal Basic Income.
But for context on the economic situation, it was an eye-wateringly terrible day on the NZX50 yesterday, with massive drops for individual companies dragging the average down. Business Desk’s (paywalled) report on the market close is full of words like “panic” and “disarray”, but there is a potential upside. One analyst quoted in the story said that if the shutdown measures are successful, things could start picking up again in a few weeks. The NZX will remain open over the coming period, as it has been designated an essential financial service.
One final extraordinary moment from yesterday – the National Party has offered the PM their full support in moving to level four restrictions, saying the country is facing an unprecedented crisis, reports Stuff. Leader Simon Bridges has also instructed all of his MPs to suspend campaign activity, and has offered the services of MPs and staff in providing any support that they can. Bridges also warmly welcomed the removal of the cap on how much businesses can claim from the wage subsidy. The ACT Party has also welcomed the government’s measures, with leader David Seymour saying the government had made the right call, and New Zealanders needed to get behind the efforts. Like I said yesterday, we’re very lucky to have political parties across the spectrum who put the country’s interests above politics at times like these.
Cologne: ‘Quit playing games – with your grandma’ on a tree in Westphalia (Photo by Oliver Berg/picture alliance via Getty Images)
6.15am: World update – is Germany’s ultra-aggressive approach working?
Germany is an anomaly in the Covid-19 pandemic in a number of ways, most notably the fact its high number of infections (27,289, per Johns Hopkins), has not been matched by anything like the same number of deaths (115, same source) as other countries hit hard by the epidemic. This is in part because its infected have a median age of 46, versus neighbouring Italy, where it is 63.
On Monday Lothar Wieler, head of the Robert Koch institute, Germany’s federal public health agency flagged another area it is diverging from close European neighbours. “The exponential growth curve is flattening off slightly,” he said, while cautioning that a clearer picture would emerge by Wednesday. The country has implemented a very aggressive lockdown, and banned gatherings of more than two. If it were able to bring a major outbreak under control, it would become the first large country since China to do so. In further positive news, its leader Angela Merkel tested negative for Covid-19.
Much of the remainder of Europe remains tightly gripped by the virus, with Spain seeing 33,000 cases (12% of them healthcare workers) and over 2,000 dead, while Italy remains the single-hardest hit nation outside China, with 59,000 infected and 5,476 deaths. The New York Times has a chilling read on how the virus was able to spread so far and fast in Italy, thanks to poor decisions and communications from its local and central governmental leaders.
One huge country joining New Zealand in the ‘go hard, go early’ camp is India which is, if anything, going much harder and earlier. Overnight, following last week’s closure of its borders, it announced a near-total lockdown, despite having just 433 confirmed cases of the illness in a nation of 1.4bn.
By contrast, the US, UK and Iran continue on a more chaotic path. In the US, which has more than 35,000 cases, there remains a partisan split over the nature of a US$1.8tn aid package, with Democrats concerned it is too favourable to business. On the health side, president Trump appears to be have a limit to his tolerance for containment, tweeting that the US “cannot let the cure be worse than the disease”, in reference to the current 15 day period of recommended limits on gatherings, dining out and shopping. The UK, which has nearly 6,000 cases, is not yet in lockdown, though businesses, including McDonalds and Nandos are beginning to close voluntarily, deeming physical distancing impossible, even on takeaways or drive-through. Iran’s outbreak has reached 23,000, with its leader Ayatollah Ali Khamenei blaming Covid-19 on a US plot targeting Iranian DNA.
The continuing pandemic remains a heavy load on markets, despite increasingly extreme measures from central banks and governments to signal their commitment ever more extreme actions. The US Federal Reserve announced it will buy as much government debt as necessary to maintain its financial system, flagging “aggressive efforts” to protect jobs and “promote a swift recovery”. Despite that, the S&P500 dipped sharply after opening on Monday, before recovering somewhat to be down 2%. This mirrored other major markets, which were down between 2.5% (Germany’s DAX) and around 4% (Britain FTSE). A rare bright spot was Japan’s Nikkei, up 2%.
6am: Recap of yesterday’s major stories
Prime minister Jacinda Ardern announced an immediate lift in the Covid-19 alert status from level two to level three, with a lift to level four at 11.59pm on Wednesday night. This means people are instructed to stay at home, schools and non-essential businesses are to close and travel will be severely limited. It will stay this way for at least four weeks. The full text of Ardern’s speech is here.
Finance minister Grant Robertson announced the Covid-19 wage subsidy scheme would be expanded and a freeze would be placed on rent increases.
The shutdown announcement came after director-general of health Ashley Bloomfield announced 36 new cases of Covid-19 in New Zealand, bringing the total to 102. More than half were directly related to overseas travel, and most of the remaining cases were close contacts of a previously confirmed case or associated with an event where there were confirmed cases already. Two were being treated as community transmission, one in the Wairarapa and one in Auckland.
In the morning, the Reserve Bank announced a $30 billion buy-up of government bonds.
In Australia, national and federal leaders agreed to a staged shutdown of “principal places of social gathering”. Papua New Guinea went into lockdown for two weeks, UK PM Boris Johnson warned that massive lockdowns could be coming soon, and US senator Rand Paul tested positive for Covid-19. The terrible toll of Covid-19 continued to rise in Italy, and German chancellor Angela Merkel went into quarantine after her doctor tested positive for Covid-19.
