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What's going to happen to the Kiwi economy now?

In light of the latest lock-down, politicians, media pundits and "experts" are out in force with fancy forecasts as to how our economy is going to get through this. The Finance Minister has characterized the new state of affairs as most likely to be a temporary shock, a blip, which the government can get people through, courtesy of re-activating the wage subsidy scheme and more borrowing. He says the economy is in great shape. If only things were that simple.


What's the worst case scenario? It's not pretty. And it's not a mechanical exercise that involves calculating the cost of each day spent in lock-down in terms of GDP, as featured in the main-stream media. It's about whether the virus is going to break our spirits. It's about whether people fall into a despondency, a sense of loss-of-control, a depression. It's about whether our mood, our sentiment starts to sour. It's about whether people read a growing chorus of media stories, mostly from overseas, that are getting stuck into the Kiwi elimination approach, branding it a failure. It's not even about whether those stories are true or not. It's about whether people start believing them to be true. About whether these stories become the new 'narrative'. It's about whether we keep the faith in our approach, or lose it.


Last year, we Kiwis felt on top of the world. Nearly everyone else was being hit harder than us. We were held up as being 'best practice'. Labour rode the wave of this 'relative success' story. But now the tables have turned. There's a feeling of relief and optimism in countries like the UK that their country is opening up. Making a coming-back. That their fast vaccination program has been a success. Comparisons making us look bad and them look good are now being made. Who knows what will be the effect of these on the Kiwi psyche? Our national pride is suddenly at stake.


To the extent there's a slump in our spirits, in our wills, the government will be powerless to prevent a major economic slump. None of us know, not one of the pundits, whether this kind of psychology could take hold. But there's a significant chance of it. And should it happen, it could occur on the back of sharp price rises due to supply-chain issues at our restricted borders and skill shortages, hikes in interest rates, falling house prices and huge pressures on those who borrowed to buy homes these past years at super high prices. This time around the stakes are high. Very high.


That's the worst case scenario. Let's keep our fingers crossed that it doesn't happen.