Covid-19 and the risks ahead: The only certainty is uncertainty

As I write this blog, New Zealand has just dropped alert levels after a fourth regional lockdown aimed at stopping community transmission of the virus. These twists and turns underline one of the major themes of the February forum: unpredictability...

Public Service Commissioner Peter Hughes chaired the session and opened with some thoughts about the scale and pace at which the public service has had to work to respond to the pandemic. Peter reflected on how the last 12 months have been the most challenging of his career – but also the most rewarding. With no “rulebook” in place to guide the public service through Covid-19, the Government and the public service has had to “learn its way forward”. Internationally, New Zealand is still ranked highest for Covid resilience (with Singapore a close second), and as Peter noted, there is nowhere else most of us would rather be living right now.

But while we can be proud of the way our public service has stepped up and delivered, we are not out of the woods yet, as our two speakers made clear …

Our first speaker was Dr Caralee McLiesh (Chief Executive and Secretary to the Treasury), who has been in her role since September 2019. Like Peter, she reflected on the challenges and rewards of the past year, while noting that it wasn’t quite what she had been expecting for her first 12 months!

Caralee talked about Covid-19’s economic and fiscal impacts and the implications for New Zealand. Again, the over-riding theme was one of uncertainty, and Caralee shared this helpful graph:

For Treasury, the uncertainty Covid brings means it is essential to remain flexible in its economic forecasting, work to scenarios, and be upfront about the uncertainty involved when modelling the scale and nature of fiscal risks.

However, there is some good news. Because of New Zealand’s successful health response, and the financial support provided through the response and recovery effort, our economy is performing better than expected.

Before we get too carried away with positive growth in sectors like construction, and indicators like business confidence rebounding quicker than expected, Caralee reminded us that this is all relative. The country has suffered a sharp economic downturn and we are not yet close to where we would have been without the pandemic.

The outlook is still uncertain and remains closely linked to our health response. Until we are on the other side of a successful vaccination programme, there will continue to be significant impacts – particularly for supply chains and international tourism. Caralee’s sobering message was that there is still a long way to go to fully recover.

Unemployment is obviously another area that has been significantly impacted by Covid. Caralee reflected that the wage subsidy has played a significant part in keeping many businesses open and people working, resulting in a lower unemployment result than expected. Again, however, our success must be tempered with the knowledge that impacts have not been felt evenly across all people, places, and industries, with corresponding drops seen in wages, hours worked, and participation rates. There were lots of nods around the room when Caralee described these effects in terms of “economic scarring”.

This uneven impact means already vulnerable groups are suffering the most. Combined with major issues we were already grappling with - such as housing affordability, increasing income inequality and an ageing population - the picture looks decidedly less rosy for Māori, Pacific peoples, women and young people looking to enter the workforce.

If we weren’t feeling it already, Caralee’s presentation started to feel like a rollercoaster ride. She wrapped things up with an observation that there are potential positives in the challenges ahead. The Government has been clear in its goals - to keep New Zealanders safe from a health perspective which, in turn, is critical to a strong economic response. The hope now is that vaccination will provide some light at the end of the tunnel, a potential end to living under alert levels and the return of overseas travel (and international students), further supporting the country’s economic recovery.

Which led in nicely to an equally engaging presentation from Chris Seed (Chief Executive and Secretary of Foreign Affairs and Trade), who focused on the changing global context - both as a result of Covid and due to changes in and between major nations.

While Caralee’s presentation centered on our response to Covid as a country, Chris reminded us that what New Zealand does happens in a wider global context. The increased complexity combined with heightened strategic tensions of the international environment has implications for New Zealand’s interests, and the values which we hold dear. Given these values may not be as aligned with other nations as before, this can affect our place in the world and how we seek to maintain it.

While reminding us of the enduring wisdom of classical times (including by quoting Thucydides’ famous observations about the Peloponnesian War – “the strong do what they can, while small states suffer what they must”), Chris reflected on some of the big geopolitical shifts (particularly in the roles the United States and China play globally) and how smaller nations like ourselves compete in global markets. He also talked about the significant role New Zealand plays, and must continue to play, in safeguarding and supporting our Pacific neighbours’ interests. This applies not only to Covid issues – such as travel zones, medical support, and protecting supply chains – but also wider issues like climate change. We also have to be aware of the growing risk of transnational cyber-crime.

At a human level, Chris also reflected on his organisation’s off-shore footprint. MFAT’s network of overseas staff has proven invaluable to our Covid response. These public servants have informed the Government’s perspectives on what’s happening elsewhere, and how that compares with – and affects – New Zealand, particularly in trade. The pace of the pandemic was also noted – requiring countries to make swift decisions based on information available at a point in time. In this environment, global institutions have had less influence on those decisions than in the past.

Chris reflected that the success of our Covid response and our ongoing positive ranking in corruption indexes impacts on our reputation and our ability to influence globally, as well as making us an attractive prospect internationally in terms of trade and immigration. How we participate in the world depends on how we operate at home. In that regard, Chris compared us with other counties that have struggled with their Covid responses.

As a public sector lawyer, I was comforted to hear Chris reflect on the importance of the rule of law during a pandemic. Citizens need to have trust and confidence in the law and in their government agencies – after all, if the state doesn’t work, little else will.

Chris left the audience with a perspective on our Covid experience that hadn’t occurred to me previously. As we think about the changes Covid has brought to our society and how we operate, what will be permanent? What will the “new normal” look like here and across the globe? Chris reflected that while there are obvious advantages to New Zealand’s health and economic response to Covid (relative to other countries), there are also some downsides. In countries where the impact has been more significant and longer lasting, we will likely see more innovative and longer-lasting changes to diversified markets or business trends.

What was clear from February’s session is the impact of Covid-19 is ongoing and uncertain – both within our own borders and globally. This is an event that has been, and will continue to be, hugely disruptive.

Ever the optimist, though, I was heartened by Chris’s parting words – adapt, improvise, overcome. There are positive changes to be leveraged from adversity, and what our new world might look like is – to a great extent – within our control as public servants to contribute to and influence.

Kia noho haumaru.