NZ beats COVID-19. Fully opens domestic economy.

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When the coronavirus pandemic was initially taking off, MB spent considerable effort urging the federal government to close Australia’s international border, alongside shutting down public gatherings.

Our views were influenced by the famous experience of Philadelphia versus St Louis in the Spanish Flu of 1918, outlined in Public health interventions and epidemic intensity during the 1918 influenza pandemic by Richard J. HatchettCarter E. Mecher, and Marc Lipsitch:

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Philadelphia downplayed the Spanish flu and stayed open for three weeks, resulting in a virus pandemic and high death rate. By contrast, St Louis immediately clamped down and banned public gatherings, resulting in virus containment and far fewer fatalities.

New Zealand acted very early, implementing possibly the strictest lockdown in the world. This “go hard, go early” response has paid dividends, with New Zealand now virus free and returning its entire domestic economy back to normal operations, with international border closures remaining in place, in what are termed “level 1” restrictions:

The New Zealand Treasury and the Reserve Bank expect direct economic output to be between 90% and 96.2% that of normal levels at Level 1:

Throughout the COVID-19 lockdown, MB argued that going hard and early with lockdowns would pay dividends, creating far less economic damage over the long-run alongside saving lives. New Zealand is testament to this approach.

Australia has obviously done a far better job of controlling the virus than most nations, helped of course by our geographic isolation and low population density (alongside New Zealand). But the Morrison Government did procrastinate early and acted weeks too slow in closing Australia’s international border and implementing domestic lockdowns.

Accordingly, the virus remains in Australia (albeit at low levels) and we will take longer to recover from the pandemic than our friends across the pond.

About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.