Recent comments by Reserve Bank of New Zealand Governor Adrian Orr (pictured) have got Steven Joyce reflecting on the ongoing impacts of Covid-19 pandemic response. Photo / Mark Mitchell
OPINION
I watched an interesting interview last weekend between the Herald’s Madison Reidy and Reserve Bank Governor Adrian Orr.
It started pleasantly enough but the tone went downhill rapidly when Reidy tried to get Orr to reflect on the cause of our current economic malaise, rather than have a more generalised discussion about what causes inflation.
Orr bristled when forced to focus on the bank’s role in dramatically expanding the money supply during the pandemic which, coupled with gargantuan fiscal stimulus, let the inflationary dogs off their leash.
The Governor wearily trotted out his now familiar talking points. We were the same as everyone else, we started tightening earlier than anyone else, we did a review of our own work and we were largely tickety-boo, we could have started tightening monetary policy two quarters earlier if we’d had amazing foresight but it wouldn’t have made much difference, and we are the only bank that’s done a review, so that makes us pretty exemplary. And could we all now move along, please.
Left unchallenged and unanswered was whether the sheer size of the initial monetary stimulus was too big (almost certainly), whether given that size it was incumbent on the bank to respond more quickly when it was clear we were in a supply shock or a series of supply shocks rather than a demand shock. Other overlooked points included whether people not in the bank had shown the “amazing foresight” he claimed was absent, whether the stimulus itself caused an asset price bubble which left some people high and dry, and whether the structure of the stimulus was too inflexible and too inclined to encourage banks to lend money to people who could ill-afford that borrowing.
The interview got me reflecting again about just how many of our current problems are caused by our response to the pandemic, and how much we need a proper inquiry into the actions of decision-makers during that time.
Every day there are signs of the post-pandemic economic grind. Our collective and substantial loss of purchasing power. The numbers of businesses, charities and sports teams quietly going broke because their balance sheets were so weakened through the pandemic that they can’t cope with the current recession. The large number of house-for-sale signs and the very few sold stickers as house owners struggle to come to terms with the shrinking value of their biggest asset. It’s a long tail of bent and broken dreams.
And it’s not just the economy. Many of our current societal ills are either directly caused or exacerbated by pandemic-era decisions. Take the health sector, where the length of waiting lists is directly linked to leaving hospitals and operating theatres empty for long periods during the pandemic. Or the criminal justice sector, where a huge backlog of court cases stems from the long closures in the courts, and where the increase in lawlessness dates from the breakdown in social norms during the pandemic. Or education, where poor school attendance can be traced from when we closed schools for long periods, and the accompanying poor academic results that have blighted the future prospects of a whole cohort of teenagers.
We need a proper inquiry into all of this so that we learn what there is to learn for the next pandemic, before those lessons are forgotten.
There are plenty of people who want to consign Covid times to the dustbin of history, but the actions taken then keep coming back to haunt us.
It may have been that all of the decisions of the time were unavoidable and couldn’t have been done any other way, but surely we owe it to ourselves to ask the questions. This thing has cost us tens of billions of dollars in our collective wealth and blighted many people’s lives. It seems to me we have sufficient cause to be intellectually curious about the answers, even before we consider the likelihood of experiencing another pandemic in the future. After all, even key ministers of that time are now prepared to accept that the second Auckland lockdown went on too long.
The new Government is fond of 90-day action plans, and No 16 on their current list is to take decisions on the scope of the extension of the current Covid inquiry. I hope it goes wide. Monetary policy, fiscal stimulus, and government decision-making with regards to lockdowns and border controls all need to be considered.
But it’s more than that. We also need a new chief commissioner for the inquiry. I have no beef against Tony Blakely, he seems a good human. But he is also an epidemiologist who was one of the architects of New Zealand’s and Australia’s response to the pandemic.
One of the key questions the inquiry needs to answer is whether allowing the Covid health response to trump everything else throughout the pandemic period was the best course of action, or whether we could have preserved life without going to the extremes we did or for as long as we did. Was there a better decision-making process than just handing the keys to the director general of health? And did the panic of the time sacrifice calm rational decision-making? After all, once that panic passed, we suddenly got a lot more sanguine about Covid hospitalisations and even deaths.
Getting Blakely to mark his own homework and that of his profession will be about as effective as getting a Reserve Bank Governor to mark his own monetary policy work. The passive “fireside chat” approach the current inquiry has taken to date does nothing to dispel the theory that Blakely is too close to be objective.
That is not to say there is no place for an epidemiologist on the inquiry. A person of Blakely’s standing should be one of the three commissioners, but the chief commissioner should be a retired judge. One whose skill and experience is to hear the evidence without fear or favour, sift it, and objectively write a conclusion.
If we don’t properly revamp this inquiry, then we might as well shut it down. But it’s important that we don’t. We owe it to ourselves to have a good uncomfortable look at what happened and what we might do differently next time. After all, that is how we learn.
Steven Joyce is a former National Party minister of finance and ,inister of transport. He is director at Joyce Advisory, and the author of the recently published book on his time in office, On the Record.