Digital Edition – May 2020 (#230)

Have We Been Conned?

New Zealand Election 2020 (Part III)



by Don Brash


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Perhaps it is dangerous to write about such a fast-moving situation as the Covid-19 pandemic when what I write may not be published for 10 days or more, but at time of writing my strong impression is that the public believe that the Government has done a remarkably good job of suppressing, perhaps even eliminating, the spread of Covid-19 in New Zealand, and that they deserve warm applause.

I believe the public has been conned.

To begin with, in common with most of the countries in Europe and North America but quite unlike the countries of East Asia, the New Zealand Government was very slow to take the virus seriously. Despite the Ministry of Health issuing a statement in late January talking of the extremely serious threat posed by the disease, the Government did little or nothing to prepare for its arrival on our shores for more than a month.

By contrast, and perhaps because they had had experience of the SARS epidemic some years ago, countries like South Korea, Taiwan, Singapore and Hong Kong swung swiftly into action with far-reaching testing and tracing. As a result, for example, Taiwan – geographically and economically much closer to the source of the virus in China than New Zealand – has vastly few total Covid-19 cases than New Zealand has had. Indeed, on a per capita basis, New Zealand has had some 17 times as many cases as Taiwan has had.

As late as the middle of March, there had been no suggestion that the very large public ceremony to mark the anniversary of the Christchurch massacre would be cancelled, even though a crowded public event would have been the perfect way of spreading the virus.

On 17 March, the Minister of Finance announced what he called a “$12.1 billion support for New Zealanders and business”. Some of that was well targeted – including an extra $500 million for the health sector and a substantial wage subsidy to help businesses retain staff. Other parts were very poorly targeted, including a permanent increase in benefit levels and a change in the depreciation rules around commercial buildings. And the Government made it clear that they intended that a further increase in the minimum wage would still take place on 1 April, making it certain that whatever impact the virus had on employment would be made worse by a significant increase in the cost of employing people.

On 23 March, the Prime Minister announced that two days later the country was moving into an Alert Level 4 lockdown for four weeks. We had to do this, we were told, because otherwise “tens of thousands” of New Zealanders would die from the disease and our hospital system – especially the availability of ICU hospital beds – would be overwhelmed. Yes, there would an economic cost it was acknowledged, but faced with a choice between saving lives and worrying about dollars, the Prime Minister was clear that she placed a higher value on lives saved than on dollars.

Has it worked? Superficially yes. The number of new cases yesterday (I’m writing on 18 April) was just eight, only 14 people were in hospital, and only three were in ICU beds. Only 11 people have died from the virus. Perhaps we could even look forward to the day when New Zealand has no cases of Covid-19, and we can all get back to work, though with our international borders permanently closed, or at least closed until an effective vaccine is discovered and deployed.

But very serious questions must be asked.

First, it is now clear that “tens of thousands of deaths” were never likely. Yes, some of the projections made by epidemiologists at Otago University suggested that deaths could rise to between 8,600 and 14,400 – not exactly “tens of thousands” but certainly a very large number – but those numbers assumed that the Ministry of Health would abandon its trace, test and isolate strategy. As Ian Harrison of Tailrisk Economics has noted, the same model “configured with effective tracing and isolation, and some other plausible assumptions, generated about 160 deaths” . And given that we have had 1,409 identified cases at this stage, and only 11 deaths as a result, it appears that the fatality rate is not much over 1% (I’m allowing for a few more deaths from those who, at time of writing, had contracted the disease but had not yet recovered).

Second, it also seems clear that Australia has had fewer cases of Covid-19 than New Zealand has had, on a per capita basis, despite having a much more relaxed attitude to “lock-down”.

Third, without exception all those who have died of Covid-19 in New Zealand are people who were over 70 (and most were over 80), all with one or more other serious “health issues”. While clearly overseas experience confirms that younger people can die of Covid-19, it appears that in other countries too those who have succumbed to the virus have overwhelmingly been over 70, and overwhelmingly people with other health issues.

At no time has our hospital system even looked like being overwhelmed, and typically no more than three or four ICU beds have been occupied at one time – of the several hundred ICU beds which either are, or could quickly be, available.

More serious still is the fact that the Prime Minister seems to think that by locking the economy down tightly she is showing that she cares more about lives than about dollars. If she imagines for a single moment that locking the economy down tightly has no effect on lives lost she is even less well informed than I had imagined. We all know that four weeks of isolation in our respective bubbles has seen a marked spike in domestic violence. We can guess that seeing a business that one has spent years or decades building up destroyed in the course of a few weeks has led to an increase in suicide. And suddenly being unable to bring home a wage or salary will be having a similarly devastating effect on the mental health and lives of many tens of thousands of employees.

Professor John Gibson, one of New Zealand’s leading academic economists, has drawn attention to the fact that life expectancy is to some extent a function of real GDP per capita. He has noted in a recent paper that “if real per capita GDP in New Zealand falls by 10% due to the lockdown and other effects associated with Covid-19, life expectancy would be predicted to fall by 1.4 years” . Of course, not all the fall in real GDP per capita is a result of the lockdown: earnings from international tourism, and the education of foreign students, were going to fall precipitously, almost no matter how severe our domestic lockdown had been.

But there can be little doubt that severely locking down much of the economy will have cost a great many lives, and very probably many more than the lives lost to Covid-19 to date. As the Prime Minister must surely know, every time the Government decides to spend money on improving road safety, or increasing the Pharmac budget, or increasing the school lunch programme, they are implicitly (and often explicitly) calculating how many dollars they are willing to spend to save a life. I strongly suspect that in adopting perhaps the strictest lockdown regime in the world, the Government has cost more lives than it has saved.

Dr Don Brash is an economist and former Member of Parliament. He served as the Governor of the Reserve Bank of New Zealand from 1988 to 2002.


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elocal Digital Edition – May 2020 (#230)

elocal Digital Edition
May 2020 (#230)


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