Finance Minister Grant Robertson defended the Government's fiscal response to the Covid-19 pandemic and addressed concerns about New Zealand recovery path at an economics conference today.
Speaking by livestream to the New Zealand Economics Forum at the University of Waikato, Robertson outlined the Government's strategy to date.
Echoing concerns raised by senior business leaders this week he was asked to outline his thinking about how New Zealand reconnects with the world in coming months as the world recovers.
"At a point where we are in elimination-land, how do we transition from that, to reconnect," asked Matt Bolger, pro vice chancellor of the Waikato Management School.
Robertson said he first wanted to push back against the idea that New Zealand was cut off and isolated from the rest of the world.
"We haven't," he said, highlighting that we remained highly connected on the trade front, even with borders effectively closed to personal travel.
"I think it is easy to draw this in a black and white way that I don't think is that accurate."
A high-powered group of business leaders this week released a statement calling for more clarity around the Government strategy.
Robertson reassured the audience that the Government "was not going to stand still just waiting for the whole population be vaccinated".
Work was continuing on the transtasman bubble and on opening travel within the Pacific, he said.
"That process continues while we work to vaccinate the whole population."
But he also defended the elimination strategy which, "gives us the freedom to operate in a normal way in New Zealand when we are at level 1."
"That strategy has served us well," he said. "The vaccination campaign has begun and we'll be in a strong position to have vaccinated all New Zealanders before the end of the year."
Robertson also defended the economic cost of the Government's elimination strategy and its fiscal response.
Drawing on an earlier speech by University of Waikato Professor John Gibson, an audience question argued that the cost of New Zealand's Covid response has been one of the largest in the OECD in terms of lost output and increased borrowing.
Robertson reassured that he was currently in the process of going over every item of spending in the Covid fund assessing whether it had been spent, and where it was still needed.
He said he recognised it was a big response.
He said he also recognised "that as time went on we needed to be returning to a more balanced fiscal position".
"What I would say is that won't happen quickly."
New Zealanders would see higher levels of Government debt than they had in the past, he said.
"But the signs are good for that coming down quicker than what we had initially forecasted."
The ratio of (net core Crown) debt to GDP would still peak in the high 40s.
But that would return to the mid-30s by the end of the 10-year forecast period.
"It will still see New Zealand sit among the least indebted countries in the world," he said.
Robertson acknowledged that the Government had made mistakes in the past year but argued it had learned from them.
"I don't want anyone to gain the impression that we think we've been perfect here," he said.
"We've made mistakes but what we've shown is that we can be adaptable and we can respond when we see mistakes being made."
The conference continues tomorrow, with a keynote address by Reserve Bank Governor Adrian Orr.