Editorial: An unexpected global storm has all eyes on Grant Robertson's fiscal response

Finance Minister Grant Robertson has little time to come up with a package to help cushion New Zealand from the disruption to trade caused by Covid-19. Photo / Mark Mitchell

Editorial

COMMENT:

In the opening months of the coalition's term of Government, Grant Robertson's forays into guest speaking at corporate events could be awkward to watch.

Whereas his predecessors Bill English and Steven Joyce were usually fawned over by business figures, question and answer sessions with Robertson tended to involve lengthy pauses as the director community looked at their shoes as they digested lunch.

How the passage of time, amid concerns of the impact of Covid-19, have changed this.

This morning Robertson will speak to the Wellington Chamber of Commerce at a time when much of the economy is looking to him for a plan to cushion New Zealand from whatever disruption the novel coronavirus sends our way.

How Robertson responds is likely to play a significant role both in September's election, but more importantly, in the economy's ability to deliver jobs and incomes for New Zealand.

With the number of cases of the virus in New Zealand appearing to be contained for now, concerns about how this will impact jobs are not.

An hour before Reserve Bank governor talked up New Zealand's strength heading into the disruption on Tuesday, saying cashflow and confidence were key, an ANZ survey suggested exporters were desperately downbeat, amid a fall in overall business confidence.

So far the impacts have been limited outside key tourism areas, international education and major export industries, but the possible effects for smaller businesses could be widespread.

As well as a general disruption to exports spilling into imports, there are specific concerns that the coming months will see a particular shortage of refrigerated shipping containers in this part of the world, threatening our ability to get perishable goods to market.

Robertson's position is far from hopeless; as he has long been saying, New Zealand has low unemployment and low public debt.

His fiscal responsibility rules were developed for normal economic times with the caveat that they could be relaxed or abandoned in the event of a global shock.

However Covid-19 affects our economy, no one will question that this is a global event.

But the finance minister does face a challenge which has dogged his Government: matching expectations with reality.

New Zealand's government debt levels might be low, making the scale of the potential response large, but the potential scale of the issue could be bigger than the public will tolerate.

On Monday, after effectively promising wage subsidies broadly similar to those used after recent earthquakes, Robertson raised the idea of the government stepping in to provide temporary working capital if banks are unwilling to.

This alone could put billions of dollars of taxpayers' money at risk in private enterprise. It may also be crucial to help re-establish supply chains.

A bigger problem is the issue of equity, with the impact of Covid-19 on business certain to be unevenly distributed. Separately, as cruel as it sounds, poor businesses should be allowed to fail.

It will be nearly impossible for Robertson to create a business continuity package which does not either exclude some businesses which are legitimately impacted by the virus, or cushion others which were struggling anyway.

Time is not on his side, with the impact on some industries into a second month, and larger problems looming.