Debt and Regret: the Covid-19 hangover lingers on.
And the politics are still playing out.
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On 25 March 2020, the then finance minister Grant Robertson sought and gained parliamentary approval for a fiscal envelope containing $40 billion of operating expenditure and $12 billion of capital. This was “a large authority to spend”, he said, but it was “the price that we have to pay” for keeping the public health system operating, people in jobs and businesses afloat during the fight against COVID-19. This was the “rainy day” for which fiscally conservative finance ministers Michael Cullen (Labour Party) and Bill English (National Party) had prudently saved, he said.
Members of the National Party, NZ First and Greens rose to support Robertson’s imprest supply bill. ACT’s David Seymour supported it too, but had some practical reservations. He said that $52 billion was “as much as all of the value produced by the whole country working for two whole months”. He asked how well the money would be spent and how effectively it would assist recovery. “It should be directly related to the goal, not trying to put in a kind of structural change that the Labour Party might otherwise want”. No MP asked if there were other effective live-saving policies on which at least some of that large sum could be spent. Everyone was afraid of COVID-19.
On that memorable “rainy day”, however, no one could have forecast exactly what the virus would do, how many it would kill, nor how people collectively would react. There was no vaccine in sight at the time. There was no effective contact-tracing system yet, and the public health system’s responses were fragmented.
In April/May 2020, confined to my home, I edited an issue of Policy Quarterly on the COVID-19 response, inviting contributions from a range of experts. While the country was still under a state of emergency and the level 4 lockdown that began 25 March – before they’d had a chance to recover and look back – what were people thinking and doing through this historic time of deep uncertainty?
Although the government’s response had thus far been substantial and nimble, New Zealand had not prepared itself well for this emergency. The official epidemic plan and the relevant law were not up to the task. The country had been slow to control its border, letting the virus in despite having seen the deadly effects elsewhere (e.g., overcrowded emergency rooms and morgues in New York and Italy) and a strict domestic lockdown was imposed. New Zealand’s level 4 was one of the most stringent on Earth.
After that PQ issue had gone to the printer, it turned out that New Zealand eliminated the disease (for a while), saved lives and reduced stress on hospitals. But there was political fallout, and the country is still counting the economic costs.
Economic consequences
Inflation was a predictable effect of Grant Robertson’s emergency fiscal stimulus, hitting a high of 7.3% in June 2022. Ahead of the 2023 election, the leading public concern was the cost of living, for which (among others complaints) Labour was severely punished by voters and soundly defeated.
More than five years on from Robertson’s request for a $52 billion binge, Kiwis are still suffering the hangover. It’s not easy to weigh up the costs and benefits of such a massive fiscal response to a global pandemic. And of course there are political disagreements about it.
There are two readers’ polls below.
The debate was reignited last week by a Treasury report. Older and wiser now, or perhaps just nostalgic for the 1990s, the Treasury is advising that the country needs to be better prepared for future economic shocks. How, and under what circumstances, should fiscal policy come to the rescue? It’s a valid question, although I won’t vouch for the Treasury’s view.
The present finance minister, National’s Nicola Willis, called the Treasury report “damning” and said: “New Zealanders are still paying the price of the previous government extending a big-spending approach, initially intended for a pandemic response” (quoted by Giles Dexter, Radio NZ.) National may have voted for it in 2020, but she implies now that the fiscal authority was extended beyond what was originally intended, as Seymour had warned might happen. Or was she just making that up in order to deflect blame onto Labour?
Willis’s comment reminded me of a 2023 report by the Auditor-General’s office about poorly controlled spending from a sum of $640 million that had been “repurposed” from the Provincial Growth Fund. The PGF had been created under the Labour–NZ First coalition agreement in 2017 – well before COVID-19 came along. It was a fiscal sweetener (of $1 billion per annum) that helped Winston and Shane to come on board with Jacinda rather than National’s Bill English.
“I'm never going to claim that we got everything perfect”, said Labour leader Chris Hipkins in reply to Willis. But he defended his party’s performance in saving lives and preserving jobs, as well as, for example, “making sure that kids could keep learning while they were at home during lockdown”. He criticised the present government for a sluggish economy and for unemployment topping 5%. (Quoted by Craig McCulloch, Radio NZ).
Treasury has estimated that the total cost of the pandemic was $66 billion over the 2020-26 financial years, or about 20.4% of GDP. That’s 27% more than the $52 billion initially approved. Comparatively, this was one of the biggest Covid-19 responses globally, in addition to imposing one of the strictest lockdown regimes at level 4.
Did the NZ Government overdo it, under-do it, or get it about right?
Each of us can judge in hindsight whether it was all worth it as a trade-off between economic and human values, or whether we should have followed a different policy pathway. Haven’t we all had those arguments?
To be prepared for this kind of thing in future, it would help to have a political consensus about how fiscal policy should respond, as against monetary policy. The Reserve Bank responded swiftly in 2020 by reducing the official cash rate. And there are other institutions designed to kick in following a disaster (e.g., EQC, MSD, ACC, public hospitals). Is there more that can or should be done to prepare financially?
A future parliament, faced again with something like Covid-19, may not be as willing to approve anything like a $52 billion overdraft. Taxpayers may be less willing too, given what they’ve experienced from inflation and interest rates since then, in addition to the damage caused by economic shutdowns and harm to their mental health and social networks.
The Ardern government gained high levels of trust and compliance in mid-2020 and were rewarded at the ballot box with 50% of the party vote and a majority in the House. It’s not clear to what extent New Zealanders would tolerate it again, however, if a future government had to adopt similar emergency measures.
What do you reckon?
As the economic impact of Covid-19 lockdown has affected New Zealanders, which of the following statements best sums up the problems?
A: The economic costs outweighed the public health benefits.
B: The economic damage would have been worse without a strict lockdown.
This question restates one that I put in an online survey on Stuff prior to the 2020 election, so I can compare the results later on. You may query whether the question accounts sufficiently for a range of other human and social concerns. But the focus here is on the economy/public health trade-off.
Despite reasonable fears at the time, Māori and Pacific peoples are not over-represented in the stats for deaths caused by Covid. But the age-profile is striking: 71% of confirmed Covid-related deaths were people 80 or over. According to Infometrics, only 3.9% of the NZ population is 80 plus.
Source: Health New Zealand, COVID-19: Case demographics, 3 August 2025 update, URL: https://www.tewhatuora.govt.nz/for-health-professionals/data-and-statistics/covid-19-data/covid-19-case-demographics .
Younger generations will continue to pay off the debts arising from sacrifices made collectively to keep maybe a few thousand elderly people alive for a few years longer. Hipkins said, in hindsight, it was worth it because we were “saving lives”, which has been Labour’s way of shutting down debate. But he was not accounting for life-years saved, nor for the opportunity cost (the cost that arises from foregoing alternative options). There were always other means available to save lives. (See an example below.)
Hipkins dismissed the Treasury report as “spin”, but the matter deserves more thought than that. As far as Politics Happens is concerned, the consequences of the fiscal responses to the pandemic are open for rational evaluation, rather than petty comments like “spin” or, for that matter, “damning”. After all, the country would benefit from a political consensus about how to be better prepared for this kind of emergency in future.
Example of heart disease: “One in five New Zealand deaths is due to heart disease”. From 2000 to 2020, there were about 150,000 deaths from heart disease (roughly 7,500 per annum). Hence, for a tiny fraction of the $66 billion spent on fighting Covid, the previous government could have addressed the “deep crisis” in New Zealand’s cardiology workforce. Cardiology staffing levels are “far below international standards” and entire regions are “without access to specialist cardiac care”. (This problem can’t be blamed solely on the present government, as specialised workforce development needs long-term effort.) An Otago Uni study by Dr Lucy Telfar Barnard estimates that the minimum overall cost of heart disease to the country in 2020 was $13.8 billion, which included $13.09 billion from 74,708 life-years lost due to deaths. The total cost of heart disease hospitalisations in 2020 was $538.8m. The cost of primary care visits for heart disease was estimated at $65.2m. “Half of all New Zealanders who suffer heart attacks are not being seen within standard timeframes” – and so it stands to reason that an investment (of tens of millions, not billions) in reducing these delays could have saved many lives too.
Was it rational, in hindsight, to spend $66 billion to save thousands from dying of Covid while a tiny fraction of that sum may have helped save thousands from dying of other causes?
For comparison, about 9000 New Zealanders died in the 1918 influenza pandemic in a population of about 1,150,000, which is just over one fifth of today’s population of 5,331,000. Males in the 30–34 age group, and Maori, were the worst affected. Given that past experience, it made sense to take emergency measures against COVID-19. But to what degree, and at what cost?
I think this is a little disingenuous IMO, especially the line that "Māori and Pacific peoples are not over-represented in the stats for deaths caused by Covid" - when you look at the 0-59yo deaths, they are as high as Pākehā, despite their much lower overall % population (although their populations are younger), and it ignores the fact that both peoples have significantly lower life expectancies and higher vulnerabilities than Pākehā.
Also, at the time, as you point out, nobody knew just how bad the human toll would be, nor did we know that vaccines could be developed as fast as they could (likely not to happen in the future, with the Trump regime killing mRNA research). I am certainly grateful for the incredibly strong and science-backed response our government had - and because I work internationally, I could see daily just how enormously different our lifestyles were here compared with the horrors other countries had to deal with. Human psychology means we all forgot those horrors and the nuances of how uncertain those times were, and just remember the personal inconveniences.
That said, I agree with both, that we need to be better prepared for future pandemics, and should put a significant portion of our cash reserves into our health system, including cardiovascular health (and prevention). But that should also include a discussion to get rid of the idiotic 30/30 rule Bernard Hickey keeps highlighting as screwing our country, under both major party rules...
It surprises me how the results appear to suggest ~50/50 either side of this issue.
I wonder how people think spending $66B was worth it - suggests to me those who think it was haven't really thought much about it and are falling back to their own self defence (i.e. not prepared to re-evaluate their previous position). For me here's some reasons I don't think it was worth it:
1) It was and is clear the overwhelming majority of deaths were in the 80+ bracket and yet we shut down all of society. Wildly we shut schools, all workplaces etc even though children and working age people had little to fear. i.e. we could have spent a fraction to protect the known vulnerable while letting the rest of us keep life, society and the economy going
2) Given a total of 2900 lives lost thats $22M/life lost. That's not lives saved of course but...
3) Given the age distribution of deaths you can also work out the cost for each (expected) year of life saved. Doing that simple calculation comes out to $5M/year of life lost.
Some will argue that without the measures a lot more people would have died but the alternative to what occurred is not NO measures, but targeted protection. It's hard not to think we could have put in targeted measures around the aged and vulnerable more effectively and for far less effort/cost that would have worked just as well, if not better.
Instead the government used the sledgehammer approach, assumed elimination was a viable strategy in the medium/long term, and locked us all down. The elimination strategy was an idealistic and illusory goal that is what caused so much damage IMO.