Covid 19 coronavirus: Construction $3b shutdown cost dwarfs $7.6m benefit - economist

Shutting down the construction industry for a month has affected about 250,000 workers and cost about $3 billion but the benefits were likely worth about $7.6 million with only a single life of a person over 70 saved.

Moreover, the New Zealand government's decision to lock down all non-essential work places was an over-reaction to the coronavirus crisis and wasn't supported by the evidence.

That's the conclusion of economist Ian Harrison, whose specialty is risk modelling and who has worked for the Reserve Bank of New Zealand, the World Bank, the International Monetary Fund and the Bank for International Settlements.

Harrison said risk modelling is highly dependent on the assumptions made and that "different and plausible assumptions can readily generate benefits" much greater than his assessment "but it is very difficult to see how they could be over 300 times higher."

Harrison is highly critical of a study commissioned by the Ministry of Health and produced by the University of Otago Covid-19 Research Group which found that up to 14,400 New Zealanders could die as a result of the virus.

The OCRG study had also said the death rate would increase dramatically if hospitals and their intensive care units were overwhelmed.

The OCRG's results "grossly overstated the number of deaths" because it "assumed that there would be no tracing and isolation of cases, or alternatively, that the ministry was so ineffective that their efforts could be disregarded," Harrison said in a 31-page critique of that work and government policy to date.

"This led to an explosion in the number of cases and deaths. The reporting of the range of deaths was also inflated by the simple expedient of excluding the model runs that produced low numbers. One of their six scenarios showed just seven deaths over a year," he said.

Harrison said the average annual death rate from the seasonal flu is about 500.

He said when he ran the same Covidsim model OCRG had used, "we found credible paths that could reduce the pace of infections to sustainable levels – deaths in the range of 50 to 500 over a year are more realistic numbers."

OCRG's assumption that tracing and isolation wouldn't be used or wouldn't work "is almost incomprehensible unless there was a deliberate attempt to blow up the numbers."

He said he had attempted to discuss this with OCRG but had no response.

But OCRG told BusinessDesk that the reason it didn't build case isolation into its main scenarios was because "NZ had no – and still does not have – plans to ever use hospitals for case isolation around Covid-19, in contrast to some Asian countries where this approach has been used, but it is rare in OECD jurisdictions."

It said when it completed its analyses for the ministry in early March, "there was some contact tracing occurring in NZ, but the home isolation of cases and the quarantine of contacts was extremely loose with zero, or very minimal, monitoring.

"Indeed, there were remarks by officials that it was fine for such people to go for a walk around the block," it said.

Since the lockdown, such matters have improved substantially and that it is now reasonable to give some weight to home isolation and home quarantining arising from contract tracing."

Shutting down the construction industry for a month has affected about 250,000 workers. Photo / File

In his modelling of the construction industry, Harrison assumed the full lockdown reduced contacts by 75 per cent and then reverted to it being 35 per cent effective from then on.

Harrison noted that, to the date of his report, April 14, the nine deaths in New Zealand had all been people over 70, which reflected the evidence from overseas showing about 85 per cent to 90 per cent of deaths are of people over 70 – as of April 17, there had been two more deaths, both of people over 70.

Harrison's findings reflect growing dissent at the government's approach and its aim to eliminate rather than just contain Covid-19 infections.

In particular, a group of six academics calling themselves Plan B have said: "International health data and experience is showing that New Zealand's lockdown may now be unnecessary, and even more harmful than the problem we're trying to solve."

These academics, all of whom have doctorates, include Simon Thornley, an Auckland University senior lecturer on epidemiology and biostatistics, Grant Schofield, professor of public health at AUT, Gerhard Sundborn, Auckland University senior lecturer on population and Pacific health, Grant Morris, Victoria University associate law professor, Ananish Chaudhuri, Auckland University experimental economics professor and visiting professor of public policy and decision making at Harvard University and Michael Jackson, a postdoctoral researcher of biostatistics and biodiscovery at Wellington University.

Their entry into the public debate prompted a swift backlash, including more than 60 Auckland University health academics writing to Prime Minister Jacinda Ardern to back her policies for handling the coronavirus crisis.

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The signatories to this letter included high-profile health researchers and scientists such as Professors Boyd Swinburn, Ngaire Kerse, Rod Jackson, Cliona Ni Mhurchu and Alistair Woodward.

With the government poised to announce on Monday whether the country can move from the current level 4 shutdown of all but essential industries to level 3, Harrison said there is a strong case for putting the construction industry back to work.

Ardern said on Thursday that level 3 would mean a number of industries, including construction and forestry firms, would be able to resume work, and, while cafes and restaurants would remain closed, take-out deliveries and drive-through restaurants would be allowed to operate.

Harrison said he has focused on construction because of its size and his arguments in favour of allowing it to resume work include that its workers are mostly younger, well, at lower risk of infection and very unlikely to have severe outcomes if they become infected.

"Much of the work is outside, in relatively small groups, so there is a lower risk of worker-to-worker infection," he said.

But he adds that "there appears to be no evidence or analysis anywhere supporting a lockdown for the building and construction industry as a necessary part of a containment strategy or even an eradication strategy."

Harrison also said there is no evidence that the food industry, which employs large numbers of workers, often with large numbers in indoor environments, experiencing any cluster event in New Zealand.

OCRG said contact tracing still "is far from state-of-the-art when compared to the use of digital technologies used in other jurisdictions."

It provided a link to its blog discussing digital technologies.

"While contact tracing leading to case isolation and quarantine for contacts is important in an early stage of pandemic control, it can soon become overwhelmed. So, once epidemic spread is in an exponential phase, it will become fairly useless as teams of contact tracers are faced with hundreds of leads."

OCRG also pointed out that it hadn't been asked to produce a cost-benefit analysis and that such work "is best done by government's Treasury or by integrated teams of epidemiologists and economists."

It also questioned whether Harrison had given adequate consideration to what would have happened without NZ's lockdown and noted that even in Sweden, which has chosen a relatively light-touch mitigation strategy, has still suffered a substantial hit to GDP.