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Home / Business / Economy

Covid 19 coronavirus: Pattrick Smellie on why it's a critical week for the lockdown

NZ Herald
5 Apr, 2020 09:33 PM5 mins to read

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This will be a critical week for the government and for the covid-19 lockdown.

Wednesday will mark the mid-point of the 28-day national confinement and, by then, if the current stable trends in infection rates continue, the clamour for relaxation will be intense.

The important trend is that testing has increased, but reported infection rates have not.

The cautious, but still premature, conclusion to be drawn is that perhaps New Zealand has escaped significant levels of community transmission and that the incredible cost to the national economy of stopping everything dead for a month just might turn out to be worth it.

READ MORE:
• Covid 19 coronavirus: NZ economy set to contract by 6 per cent in 2020 - ASB, ANZ Bank
• Coronavirus: NZ facing worst-case economic scenario, says Grant Robertson
• Coronavirus: Economy 'in the eye of the storm' – Finance Minister Grant Robertson says

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That is what everyone hopes.

But it is simply too soon to tell.

If that trend remains intact through to the middle of this week, and particularly if it's still looking that way by this time next week, it's odds on that at least some industries and parts of the country will start to return to some kind of normal, perhaps even towards the end of the fourth week of lockdown.

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For that reason, this week's Cabinet and covid-19 Cabinet committees will be shifting their focus from how to make the lockdown work, to how to start to lift it.

Business groups are already pushing the officials overseeing the lockdown to start spelling out the criteria and processes by which people can return to work, and how and when businesses can start to open their doors. For many, just a few days earlier or later is becoming critical to whether jobs and businesses will even be there.

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• Covid19.govt.nz: The Government's official Covid-19 advisory website

New Zealand firms tend to be under-capitalised, so as Kirk Hope, chief executive of Business New Zealand, said over the weekend: "There's a big difference between four weeks without cashflow and six weeks without. There's an even bigger difference if it's two months."

The slew of measures intended to smooth the path for distressed businesses over such a period reached a kind of high-point last Friday, with the announcement that insolvency provisions in the Companies Act will be relaxed for the next six months, alleviating the requirement on responsible company directors to contemplate closure if the covid-19 impact on their business threatens a period of insolvent trading.

An unexpected and interesting twist accompanied that announcement: the offer of a hibernation process that could see a business freeze its debts for six months to give it breathing space. Just how many firms will be able to use the scheme remains to be seen. There are multiple hoops to jump through, starting with a threshold test that isn't yet defined and the need to gain the agreement of 50 percent of creditors by both number and value. It won't be for everyone, but it does drive home the point that policymakers want firms to hang on in there if they can.

So, the shorter the lockdown the better.

All the more so because the longer the lockdown continues, the more the grim political calculus that pits loss of life from the coronavirus against loss of life, health and prosperity caused by a deep and government-induced recession or depression weighs in favour of the economic argument.

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For that reason, the government needs at least to start showing worried firms and their employees the rabbit this week.

Will it be possible for some industries, in some regions, to start operating ahead of other areas?

Will parts of the country that have relatively few cases of covid-19 and little or no sign of community transmission - like Tairawhiti, where forestry is at a standstill and only one of the 1,039 nationally identified cases of the virus has been reported - be allowed to return to level 3 or 2 much sooner than regions that still have obvious hotspots, like Auckland and Bluff?

And what exactly are the rules for level 3, a state we experienced for just a couple of days, or level 2, which was barely in place for a day before the country moved in under a week from first hearing about the alert system to locking the whole place down?

These are huge political challenges.

But they are nothing like the challenge that will arise if those infection figures start rising in the early part of this week.

We've had a hint in the last couple of days that a four-week lockdown might not have to go longer, at least in large parts of the country.

Hope is justified. Expectation is not.

But human nature wills expectation.

If hope proves unjustified, a far uglier, more desperate mood is likely to test the political will to see the lockdown strategy through, even though the fact is that the longer it runs, the more likely it will be to achieve the health outcome we - along with so many other countries - are already sacrificing so much to achieve.

- BusinessDesk

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