This is as close to realism as you will find in the NZ media

New Zealand's big bill for 'lockdown we didn't need'

New Zealand's spending on welfare support, and the extent of its quantitative easing, are significantly higher as a measure of gross domestic product (GDP), than other countries that have been more affected by Covid-19, Treasury data shows.

Susan Edmunds

Stuff.co,nz,

29 May, 2020

Treasury's latest Covid-19 economic dashboard shows that New Zealand has made payments in support of welfare, wages, health and tax reductions equal to 20 per cent of GDP.

The extent of central bank quantitative easing is expected to be equal to just under 20 per cent of GDP.

That compares to quantitative easing expected to equal 10 per cent of GDP in the United Kingdom, with welfare support at about 5 per cent.

In Australia, welfare payments were 10 per cent of GDP and quantitative easing less than 5 per cent.

In the US, welfare support is about 8 per cent of GDP, although its quantitative easing-to-GDP measure is slightly higher than New Zealand's.

New Zealand's response is larger than most, compared to GDP.

Gareth Kiernan, chief forecaster at Infometrics, said New Zealand's lockdown was more stringent than the other countries' responses.

"The harsher response arguably needs a greater fiscal response as well, although if other countries stay in higher-level lockdown conditions for longer then that situation could change."

But he said New Zealand's fiscal position at the outset meant it was better placed to respond with more fiscal stimulus.

Another economist, Tony Alexander, said the lockdown in New Zealand was '"particularly harsh".

“The evidence emerging now is that it did not need to be so stringent. But hindsight is a wonderful thing."

He said data around the world was showing that big differences between lockdown strictness yielded very small changes in infection and fatality rate control.

"A key issue for New Zealand is that we are far more dependent upon export earnings from foreign visitors than most other countries, with our dependency over twice that of Australia as a proportion of GDP.

"We also have a deep drought under way. But we also have a centre-left government in power with few runs on the board of successful policy stories which they can take into this year’s general election and the Covid-19 crisis has provided them with an opportunity to open the spending spigots and - as seen in post-Budget announcements - to direct extra spending toward their favoured areas.

"There is a high risk that the $20 billion extra spending provided in the Budget is allocated more for social equity causes, of which many are highly deserving, than actual economic insulation and stimulus."

He said a business recovery plan would be needed "at some point".