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Paving the path to recovery

Published in Insights, The New Zealand Initiative’s newsletter, 1 May 2020

New Zealand has come out of lockdown to enter the purgatory of Three-dom (hopefully for only a couple of weeks). The path towards a new normal remains long and littered with challenges.

Since the crisis affects every part of the economy, policy-thinking must do two things at once: It needs to deal with myriad individual issues, but in doing so keep the bigger picture in mind.

That bigger picture is the question of what kind of country we want after the pandemic.

The most immediate challenge is to ensure employees retain a connection to their workplaces not just during the lockdown but also during the recession. The wage subsidy scheme was a blunt tool, but it broadly achieved this.

Still, there are two reasons for concern. First, the scheme’s rough-and-ready nature meant it was not properly targeted, let alone fine-tuned. That is not a criticism of the Government – there simply was no time for designing something better.

However, it meant the scheme has paid out to some companies that technically qualified but were not in the greatest need. Conversely, it was not generous enough for other companies.

It would be unfair to blame businesses for accessing the scheme if they qualified for it. But similarly, if the Government were to extend the scheme beyond the 12-weeks limitation, it will need to refine the criteria.

Beyond such short-term questions, we must ask how to reopen our economy. This week, Trade Minister David Parker co-authored a piece with his ministerial colleagues from Australia, Singapore and the UK. The ministers stressed the importance of free trade.

At the Initiative, we believe this is the right way forward. We released a research note this week in which we explained the trade opportunities open to New Zealand after Covid-19. We applaud the Government’s move in this direction.

Another way of reopening will be to allow international students to enter New Zealand again. In a short paper released today, we presented a plan to revive our education export business. Provided the students undergo a strict quarantine, they should be able to study at New Zealand universities again. This would prevent our universities experiencing severe financial difficulty over the coming years.

Our recovery path will be bumpy. But good policy development can help clear the road and lead us towards a better future.

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