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National virus rescue package ‘must aim to achieve change’

Economic assistance should look to the future as well as saving successful businesses, says academic

New Zealand’s government must use its $12 billion Covid-19 rescue package to protect the economy and create social change when the pandemic recedes, a leading financial crisis academic has said.

Ilan Noy, inaugural chair in the economics of disasters and climate change at Victoria University of Wellington, says the government must clearly define what it wants to achieve.

“The size of the fiscal package probably doesn’t matter right now. After all, it is unclear at this point how many entities—employees, employers, and firms big and small—will seek help and for how long that help will be required,” he says in an editorial published by the university.

“It is important, however, for the government to project a unified and forceful willingness to help, and a readiness to deploy quickly and efficiently.”

Noy suggests the coalition government should focus on three aims with its economic assistance measures.

“The first and most obvious is to make sure that no one living in New Zealand lacks the basics in the weeks ahead. That we all get the shelter, nutrition and essential services we need. This has rightly been the focus of the largest component of the government’s programme—the wage subsidy—and has already been mobilised to put money in people’s pockets, with payments placed in tens of thousands of bank accounts.”

He says the second aim should be to help NZ businesses begin operating “as quickly and fully as possible” once the threat to public health has passed.

“We want to make sure our successful businesses are being propped up and are ready to forge ahead, make money and employ more and more people,” he writes.

“There is a risk here that we will continue to support businesses that were destined to fail, and we will be pouring good money after bad in a futile effort to do so.”

The government must also consider generational debt and the need to deal with climate change impacts and a flawed health system.

“Society’s interest is the last aim of this massive fiscal injection—to generate or create change,” he writes.

“Ethically, we cannot continue emitting carbon dioxide into the atmosphere and pretend that the climate is not changing. Nor can we ignore the state of our health system. Parts of it are underfunded and consequently are underperforming.”