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The return of the lockdown

NZ has avoided the worst of COVID-19 so far. Can we repeat that?

Auckland is back at Alert Level 3 as of 12 pm today following the news of possible community transmission. Offices shut, non-essential workers working from home and school kids learning from home. The rest of New Zealand (NZ) is at Level 2 where businesses can remain open. Returning to lockdown has been remarkably draining.

At a time like this, it is useful to take stock of what's happened. I have previously written about the economic impacts of COVID-19 in the event of a double hit, and what to expect in the back half of 2020. I was remarkably complacent about community transmission returning. I thought when we went back to Level One that it was unlikely the virus would return in a big way. Surely containing it at the border wouldn't be too hard?

Seems that was a bold assumption with the risk of false negatives, plus people either fleeing the two-week quarantine or being allowed to leave. Two weeks of quarantine must be difficult for people's mental health but its hard not to think these escape artists have dramatically let down our team of five million. Speaking of which, the mental health impact of returning to lockdown must be pretty tremendous for NZ as a whole.

The NZ Government will need to step up to the plate yet again

Governments walking a tightrope during COVID-19

So far New Zealand has been lucky and avoided much of the health suffering that has affected countries internationally. Also, since we have avoided that, we have been able to return to work and get our economy going again. That could be turned on its head now if we aren't careful.

With the possibility of community transmission returning in earnest looms the threat of a double-dip recession. In a double-dip economic activity plummets twice, as the name implies. OECD estimates suggest this dip is ~10% of GDP. While the economic pain from this is pretty concentrated, long-term it will all come out in the wash.

Back in April, I talked about the role of government as a safety net during COVID-19. That role will be tested now as the wage subsidy expires. Combined with the threat of renewed community transmission, there is the possibility that many businesses and jobs will again be on the brink. I don't know if I support a Universal Basic Income (UBI) long term, but I do right now reflecting the risk of what could happen if large numbers of people are cut out from consumption. That will be the focus of an upcoming article.

Kia kaha NZ.


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