Friday, 7 August 2020

Mapping Covid in NZ: Genome says?

Things I learned from what looks to be a superb study on Covid in New Zealand using genetic analysis of 56% of all confirmed cases:
  1. Only 19% of cases that came into New Zealand resulted in more than one additional person being infected while 24% led to a single additional infection - presumably policy substantially reduced transmission;
  2. Lockdown reduced R-naught of our biggest cluster from 7 to 0.2 within a week;
  3. The 649 cases analysed showed 277 separate introductions of the virus into New Zealand;
  4. There is no evidence of the virus circulating before the first reported case on 26 February;
  5. The largest cluster came from the US, and North America provided most of the cases resulting in transmission linkages.
I was very worried in February that it had already gotten here. Somehow, it hadn't. We've been very lucky. 

Oh, and obviously, lockdown worked. 

Things you wouldn't think need explaining, but somehow still do

The world's a puzzling place.

Maybe cognitive constraints bind a lot more tightly than I'd ever thought. 

The government runs New Zealand's managed isolation system for arrivals at the border. The Ministry of Health was making an awful mess of things, so the military took over parts of it. 

This week we learned that the government hasn't really been testing frontline isolation staff for Covid. They have an aspirational target of testing staff every two weeks, and do have more regular health checks for fever and the like. 

This seems like one of those things that anyone who's been paying the least bit of attention to the whole Covid thing might have already known, without a report. 

Just look at this. 
The Ministry of Health has seen the report and asked the authors to provide more details about the difference between a test every two weeks compared to once a week.

“You definitely get a lot of extra benefit from the weekly test as opposed to two weeks,” Hendy said. “The Ministry is certainly keen to understand the risks and how to manage it.”

Currently, there are tests available for workers who develop symptoms. Hendy concedes people shouldn’t be forced to take weekly swabs but strongly encouraged to do so.

“If those weekly tests are available then that drastically cuts the risk of them passing the disease undetected onto other people such as family members or others in the community,” Hendy said.

“It would mean we caught it early enough before it got passed on more widely.”
Just amazing. 

It's amazing that the Ministry has to be told that testing is a good idea.

It's amazing that the Ministry would assign ANY staff into these roles who would not be willing to undergo regular tests. It's stupid because the testing matters, and it's stupid because the kinds of people who would refuse to be tested are the last people you want anywhere near a freaking managed isolation system. What other corners would those Covidiots be happy to cut? Don't hire muppets in these roles! It's too important!

This thing is going to be around for a long time. Getting the border processes right matters. It's amazing that we haven't had an outbreak yet despite all this. 

Tuesday, 4 August 2020

Innovative island nations

An intriguing proposal from an innovative island nation offering safer respite from the pandemic:
The government of a Caribbean island has a tantalizing suggestion for quarantine-weary Canadians: Working from home is a lot more palatable when you're doing it remotely from a tropical paradise.

The island nation of Barbados has launched something it's calling a Barbados Welcome Stamp, a one-year remote working visa that gives foreigners the right to live and work remotely in Barbados while they ride out the COVID-19 pandemic.

Starting now, applicants can send in their personal information at a portal website. The application will be processed within 72 hours, at which point they may be approved to come live and work remotely in Barbados.

There are a few stipulations, namely that you have to make $50,000 US a year and there's a non-refundable fee of $2,000 US for an individual and $3,000 US for families, but once that's paid, a successful applicant is all set.

"You don't need to work in Europe, or the U.S or Latin America if you can come here and work for a couple months at a time, go back and come back," Barbados Prime Minister Mia Amor Mottley said when she first suggested the idea earlier this month.
There would be a lot of interest in this kind of option in New Zealand as well, with arrivals covering their own costs of testing and of managed isolation. Because I've been rather active in this space, I get emails from folks abroad who'd be eager to join us. This one came in last week: 
Greetings Dr. Crampton,
I noticed your tweet last week, quoted here:
"It is really hard to overstate the potential gains if NZ can sort out scaling up managed isolation to enable some of these workers to bring their jobs with them to work remotely from here." -- @EricCrampton
My wife and I are former XXXXXX engineering Directors who just left XXXXXX to start a start-up. We're US-born, living in Northern California. We realized it would be great to work in NZ for a year or a few years, not just because of covid, but because the US political situation is not great. In the time of pre-Covid NZ immigration, it looks like this was easy, and we probably would already be in NZ on a short-term visa, and would be applying for an entrepreneur's visa, with the idea of staffing up starting in NZ.
But of course there is Covid. My best understanding of the NZ gov web sites is that there are no channels open to us now,
Can you share any advice about how we should best proceed?  Of course, if there's someone better for us to talk to or work with (whether in the domain of gov, org, or commercial expediters), please let me know.
I advised my correspondent that nothing here is likely to change this side of the election, so they might either wait, or try a more innovative island nation like Barbados instead. They've said they're waiting. 

Safely scaling up managed isolation matters. 

I cover this stuff in this week's column over at Newsroom - currently gated, but usually comes ungated later in the week. A snippet:
Effective capacity in managed isolation has increased to just over 14,000 arrivals per month. While that sounds like a lot, the average month in 2019 saw over 250,000 Kiwis returning home after business trips, foreign study, holidays, or visits with friends and family. Non-resident Kiwis returning home from abroad for the longer term added about another 1,750 per month.

There will not be a lot of Kiwis keen on travelling to the Covid-ridden parts of the world, but the longer the pandemic lasts, the harder it will be to continue to defer travel. Even if Kiwis cut their travel to a quarter of what it was before Covid, they would still take up more than four times as much room as is available in the managed isolation system. Add to that tally the Kiwis abroad who would also like to come home, as well as the overseas specialists necessary in a wide range of business and infrastructure projects, and the need to safely scale up managed isolation becomes rather obvious.

If the Government expected vaccines or effective treatment to be just around the corner, maintaining the system as it is could be defensible. People can usually defer travel for a few months, barring emergency cases. Holidays to visit family and friends abroad can be delayed. Big trips abroad are once-in-a-lifetime events for a lot of us and putting them off for a year might not matter so much – and especially when going abroad is particularly unappealing. Business trips can be delayed, with video chats taking their place in the short term.

But the longer this all lasts, the harder it is to defer travel.

The odds of family emergencies abroad get higher over longer periods. 1.2 million Kiwis were born overseas. If ten percent of them have a family emergency in any given year requiring a trip abroad, that’s 10,000 spaces in managed isolation per month as they return home.

The costs of forgoing business travel increase as opportunities deferred become lost contacts and contracts – over 32,000 Kiwis returned from business trips abroad every month, before Covid. And companies here needing foreign experts can only defer those arrivals for so long before costs start rapidly escalating.

None of this is any argument for prioritising ‘the economy’ or business over health. Any outbreak here resulting in another lockdown would be economically devastating. Rather, it is an argument for building the systems and infrastructure necessary to be able to safely accommodate far more travellers than the system can currently handle.

By these numbers, scaling up is critical even if we consider only the needs of Kiwis. If we allow ourselves to think a bit more broadly, it becomes even more important.

New Zealand’s success in managing Covid makes the country a very attractive proposition. Students who would have studied in America, but who do not like the prospect of lectures via Zoom, could find studying here to be a very attractive alternative.

And many abroad, working remotely due to the pandemic, could bring their jobs with them to work remotely from here instead. As they would continue to be paid by their overseas employers, their work in New Zealand would count as the export of a service while they spent their earnings, and paid taxes, here. Other countries rightly see this opportunity: last week, Barbados began offering a one-year remote working visa encouraging people to bring their jobs with them to their island in the Caribbean.

The system has to change.  

Thursday, 30 July 2020

Fix the darned pipes

Wellington loses somewhere between 7 and 32 percent of its water because of leaks in the pipes. Nobody knows how much is lost because water isn't properly metered. Wellington has more than three times as many old cruddy pipes as the next worst council, Christchurch. 

Getting a new source to meet both new demand and the leaks will cost $250 million. Additional sources are likely worth having anyway for resilience against quakes, so long as they don't feed into the same potential fail point of the big pipe at the main faultlines. But the leaks mean supply costs are higher than they need to be. 

Metering makes an awful lot of sense - or at least I'm pretty optimistic that the business case will come out well. 

Wellington Council's decided to spend $200m strengthening the library rather than looking to the something more like a $90 million model based on the rather nice example in Christchurch. 

There are somewhere around 80,000 households in Wellington. The library then costs each household a bit over $3k in capital costs. There's a huge looming capital cost in fixing all the pipes. 

So long as voters keep rewarding councillors and mayors for flashy new convention centres ($180 million, or about $2,250 per household) and for deciding that 1990s libraries are actually historical monuments that have to be kept exactly as-is but strengthened every few years to new standards, and keep failing to punish councillors and mayors for letting all of the underground infrastructure rot out from under us, this is what we'll keep getting. 

Tuesday, 28 July 2020

Better borders

Kate MacNamara over at the Herald goes through the problems caused by the current lack of capacity in New Zealand's managed isolation facilities
New Zealand's current border settings allow only citizens and permanent residents into the country, with very limited exceptions.

Despite these restrictions, demand has threatened to overwhelm the Government's capacity to accept arrivals, at least under the current policy settings. New Zealand requires all arrivals to spend at least 14 days in managed isolation, at which point most leave following a negative test for the virus.

Capacity for such approved facilities is roughly 6000 per fortnight. Recently, those facilities came so close to brimming over that the Government, through airlines, suspended new international bookings for arrival into the country for most of July.

The log jam has many implications. It curtailed the ability of New Zealanders abroad to return home (there is an estimated one million, though there is no way currently to estimate demand for return). It has also pushed farther toward the horizon the prospect of New Zealand accepting a wider range of arrivals, foreign students, work visa holders and tourists among them.

All have large implications for the economy; foreign students brought in some $5 billion annually before Covid-19. International tourism was more valuable still.
MacNamara also notes the suggestions I've had for scaling things up at the border. 

This is a problem that isn't going to go away. The virus is going to be around for a long time. Getting things set at the border to enable more people safely to re-enter will become increasingly important. Delaying travel gets more and more costly for those who are able move their travel plans around. 

Even the best system can leak. Making sure that contact tracing is up to spec is important. I still think it would be a good idea for the government to start training even more contact tracers, just in case. They could manage it as a kind of Army Reserves, but for contact tracing. Pay people from all over the country to attend training and provide a stipend for them to be willing to be called into contact tracing service if needed for the door-knocking parts of the job that cannot be done from remote call-tracing centres.

Meanwhile, Stuff reports that AirNZ understands the government now to be working on a voucher system for returning Kiwis. I have no inside knowledge on that one - I have floated the idea in opeds over the past month or longer, and on twitter, [update - and a podcast!] well before our report on it came out last week. 

I hope that AirNZ is right on this!
Air New Zealand chief commercial and customer officer Cam Wallace said the Government was looking to set up a voucher system which passengers would need to access in order to return to New Zealand, regardless of which airline they flew with.

His understanding was that it would be up to customers to obtain vouchers before booking an airfare home. Failure to do so would result in passengers not being allowed to board a flight to New Zealand.

Shoup ba doup

It's a true but little-known fact that Salt-N-Pepa's classic song was actually an ode to Donald Shoup. 

Okay, maybe not. But it should have been. 

The National Policy Statement on urban planning bans larger cities from having minimum parking restrictions. The Shoupistas have conquered New Zealand. 

It is excellent news; congratulations in particular to Julie Anne Genter. 

A snippet:
But the more substantial cost of on-street parking, if council does not meter the spaces, is the congestion caused as people drive around looking for free parking. As Seinfeld’s George Costanza put it almost thirty years ago, “Why should I pay, when if I apply myself, maybe I could get it for free?”

That hunt for free parking imposes real costs. Economist Donald Shoup, who has spent the bulk of his long career tracing out the economics of urban parking, found that between 8 and 74 per cent of traffic in congested cities was caused by cruising for parking.

In New York, in the early 1990s, drivers spent between eight and 14 minutes, on average, cruising for parking.

If on-street parking is priced properly, there is no need to cruise for parking. High prices for on-street parking during peak times in popular places encourage people to only park in those places when it is really important, and encourage other people to build parking garages that charge for car storage.

But there is also a worse political economy effect of unpriced on-street parking. When on-street parking has no monetary cost for drivers in places where people want to be, there will always be shortages. Shortages lead councils to force other people to build more parking.
Fun bit: I wanted to cite the excellent George Costanza line about how nobody in his family ever paid for parking - if you applied yourself, you could get it for free. So I dug it up from the online Seinfeld scripts and used it in the column.

Then I wanted to get Shoup's numbers from his classic paper so went and dug that up - to find that he'd opened with the Costanza line as epigraph. 


Morning roundup

The browser tabs... there are so many. 

Monday, 27 July 2020

Safe arrivals

If entry into New Zealand from abroad is safe, it should be allowed. 

People arriving from places that are Covid-free, or no more risky than New Zealand, and who get here on flights that do not intersect with risky places, should return to normal travel arrangements. Currently, the Cook Islands, the rest of New Zealand's Pacific Island realm, and Taiwan would fit the bill - along possibly with Vietnam, if the epidemiologists figure that's safe. Similarly, any Australian states that get things reliably under control and maintain adequate border measures against the states that haven't, could be invited into our Pacific 'bubble'. 

Entry from other places needs to be made safe. And New Zealand needs to scale up its managed isolation system so that more people can join us - both Kiwis abroad returning home and others who might wish to come in. 

I've been banging on about this for some time. We released a more thorough report on it late last week, with a column in Newsroom as prequel

Here's the basic mechanism we've proposed:
  • Arrivals from safe places of safe people (those who have not recently travelled outside of those safe places), on flights that do not involve transit or connections through unsafe places, should be allowed without requiring stays in managed isolation. Determining which places are safe or not should be left to the epidemiologists. 
  • Those arriving from risky places should be required to present their booking in a managed isolation facility before boarding a flight to get here. Making those arriving responsible for making their own bookings gives them some control over the times of their arrival and takes some of that burden off of the government. 
  • The government should start training up staff necessary to the scaling up of managed isolation. 
  • Rather than the government contracting out facilities for use as managed isolation facilities, those facilities should instead contract with the government to provide services - and charged at cost. Facilities would be free to set their own prices for stays in isolation. If prices in managed isolation started looking high during some times of year, other hotels or resorts or campgrounds might flip into becoming managed isolation providers - contracting with the government for the necessary health and other staff. 
  • Rather than the government charging a fee to some returning Kiwis for their stays in managed isolation, it could instead provide a voucher equivalent to the cost of a stay in a basic facility to those Kiwis whose stays the government would want to subsidise. I have a lot of sympathy for the #TeamOfSixMillion folks who want no charges for any returning Kiwis, but I worry that that way of doing things very quickly gets you into implicit rationing because of the cost to the state and voter distaste of shelling out a lot of money for the visits of Kiwis who have lived abroad for decades. The most likely outcome in that case is that the government makes a big deal about not charging because it would be unkind, but would just not do much to increase capacity and ignore the costs it imposes by lack of access. In any case, my ethics about who should get vouchers and who shouldn't are no better than anyone else's. I just think this mechanism makes it a lot easier to scale things up. Eligible Kiwis could apply the value of their vouchers to the full cost of a stay at a basic facility during non-peak times, or as partial payment for a stay at a nicer facility or for a stay during peak times. All of that helps encourage more hotels, motels, resorts and other places flip into becoming managed isolation facilities. 
I chatted with John Campbell about it on Breakfast, and with Mike Hosking on Newstalk (a 5.40 am pre-record egads!), and with Jesse Mulligan over on Afternoons. Susan Edmunds at Stuff covered it as well. 

Pattrick Smellie covered it at the Herald, but puts it into a standard 'health versus the economy' framework. 

The case for reopening to the Islands is not an economic one, at least not for New Zealand. It's a humanitarian one. New Zealand should be willing to admit travellers from the Covid-free Islands without an isolation period; those Islands' governments may be willing to allow travel from New Zealand without isolation as well. New Zealand wouldn't be picking up huge new business opportunities by reopening to the Cooks. But it matters a lot to families that are separated. And where they and NZ remain Covid-free, there is no sense in maintaining the restriction. We just need to be ready to reinstate restrictions if conditions change. 

And the measures I suggest for allowing more visitors from abroad to come to New Zealand under managed isolation come with increases in protective measures, like requirements that those visitors enable Google Maps location sharing with NZ contact tracing teams and show up for a post-isolation test - just to be sure. There's a lot you can to do increase capabilities and capacity on a user-pays basis for non-citizen arrivals when a lot of people are willing to pay a lot of money to come to NZ. 

He may be right that there's no public appetite for anything that might enable more people to come here, even if it's done with even tighter safety standards than are now in place. And that it's unlikely that the government will move much on this before the election. 

But it would be dumb to pitch measures that were actually a health/econ tradeoff - if anything of that sort compromised safety, we could quickly again be in lockdowns, and the losses on that side are easily greater than the gains from allowing more people through. It takes a lot of economic activity from new arrivals to make up for the GDP losses of lockdown. Scaling up safely matters. 

Thursday, 23 July 2020

Living free

Holidays over the winter school break were glorious.

We took the ferry across to the South Island to catch up with friends, find some snow, and see what was all going on on the Mainland.

I'm giving way more of a travelogue here than I ever normally would, because of the anecdata on what restaurants, tourist spots, and hospitality venues were like. The loss of all international tourists can matter. 

The Monday afternoon ride across was wonderful. Calm all the way through with smooth sailing. We booked our sailing a month in advance. The Bluebridge was already booked out for the ride South, so we took the Interislander - and the Bluebridge on the way back North. 

We made it through to Kaikoura that evening. After dropping our bags, we went out in search of food. Kaikoura has always been a bit of a tourist town, and I wanted to see how busy things were. A lot of places seemed closed - perhaps because we were late at night, perhaps for other reasons. But we stopped at Strawberry Tree pub. We got the last table, and they'd already run out of the lamb shanks and steak - they'd underestimated demand over school holidays. It sounded like things had been slow and they'd not reckoned on its picking up quite this much. I hope it keeps up. The fish and chips were excellent.

We stopped to see the seals the next morning before heading out to the snow. The seals were happy as always. The walking trails were busy, and while the parking lot at trailhead was empty when we arrived, it was full when we left.

From there, off to Castle Hill Village for the night to meet up with friends, before a Wednesday and Thursday of skiing at Porters.

We stopped in Cheviot for lunch. Cheviot was sad. It was stranded by the Kaikoura earthquake in 2016, north of the detour for those heading up to Kaikoura and points north, and not a destination unto itself. Only one cafe seemed left, everything else was closed. I don't know whether they'd all gone before Covid, or whether Covid put the final boot in.

The pies were good at the Cheviot Tea Rooms, and it seemed busy enough for lunch hour, but it was all that was left. 

Further south, Pegasus Bay's cellar door and restaurant were closed - open only on the weekends now. Torlesse's cellar door was open - their port is always great value. But we were the only ones there.

Porters had what seemed a reasonable turnout for a very early part of the season. Not all the runs were yet open - more snow was needed. And parts of the ones that were open were a bit icy. But it was still great. I missed the snow. 

We went back to Christchurch Thursday night to see what's all been happening in our old home town. We were a bit late heading out for dinner and got the last table at Spice Paragon. Dinner was excellent, and I doubt we'd have been able to get a walk-in table absent Covid. But it was great to see that the place was full. 

Friday we explored downtown. Much of it was unrecognisable because of the building that's happened since I left in 2014. Tourist places in town were busy. The Canterbury Museum was busy with a couple of new exhibitions; the Arts Centre was busy as well, but the couple of food carts were lonely. 

The new Riverside Market seemed spectacularly successful. It was absolutely teeming early Friday afternoon. But elsewhere there were a lot of For Lease signs and quiet shops.

The University Staff Club was busy and full on Friday night, but not as busy as it typically was when I was on faculty there and the crowds would flow out into the gardens and dozens of faculty kids would run around near the stream. Friends wondered when and whether the government would ever allow international students to return under managed isolation, and spoke darkly about the consequences of its not being sorted. It will be very very bad. And other developments also had me very glad to be able to put the place under a Somebody Else's Problem field. The kinds of things Matt Taibbi warns about in his newsletter are creeping in. 

Alpine Ice was chocka that evening - as busy as I've ever seen it. Also, the standard of skating there has improved considerably. I'm not great at skating, for a Canadian, but that would typically have a bad Canadian in the top 5% at Alpine. This time, only the top quarter. That's good news. 

Saturday was more hanging out with friends, exploring town, and dinner at Himalayas. They were quiet enough when we arrived, but a party of a bit more than a dozen 19 year olds (or thereabouts), each charged with a bottle of wine on entry (and disposing loudly of the contents later in the night), put an end to the quiet rather quickly. 

I'm glad those kinds of festivities are here possible again, but I'd prefer to view them from a somewhat greater distance. 

Sunday we headed south again to Oamaru, stopping (as everyone always should) in Waimate to see the wallabies and in hope that Gwen were still there. 

When I coordinated the Erskine programme at Canterbury for visiting scholars arriving into the Economics Department, I put together a bit of a tiki tour guide for them for a South Island driving tour. I'd tell them to start by driving to Waimate to feed the wallabies and have a chat with Gwen. Gwen is a laugh-riot. If you haven't gone there, just do it. The wallabies are also very cute. They'll hold your hand while you feed them. 

The wallaby park was as busy as I've ever seen it, but we had always avoided doing anything touristy during school holidays when I was based in Christchurch. 

Lunch in Waimate at the Waimate Kitchen & Bar was superb. The place was not as busy as I'd have hoped for a Sunday lunch crowd. We weren't the only ones there, but well over half the tables were empty. And the rest of the main drag was very very quiet. 

Then, south to Oamaru in time to see the Little Blue Penguins come ashore for the night. Another of those 'if you haven't done it yet, what the heck is wrong with you' spots. At sunset, the little blues start coming ashore in rafts, shake themselves off, come up the rocks, and scurry out to their nesting boxes. They sing to their mates on their return. It's lovely. 

It had been a while since we'd been there - they now have a luxury box closer to the action, and not much more expensive than the standard seats. That slightly more expensive seating was near full; the standard seating was nearly empty. They still provide all the narration in both English and Mandarin, and there were some visitors there who did seem to appreciate the bilingual explanations.

We had dinner at the AirBnB that night rather than heading out, but the tourist-facing places in Oamaru on Monday were grim. Steampunk HQ was busy, and excellent, but the Victorian district was deathly. Perhaps some shops are only open on weekends now, but certainly would have been open more regularly during school holidays pre-Covid. We bought a few things at one of the shops, including a nifty 'vaping jacket' for me, and it seemed like the owner had not made any substantial sales in rather some time. 

The parts of town that cater to locals and to the agricultural community seemed busy. PaperPlus was full of people buying books and scratchies. The farm supply shops looked busy. 

But we were the only ones having lunch at India Garden that day.

Then, on to Tekapo - with a stop along the way at the Vanished World Centre for Fossils in Duntroon where the kids chipped tiny fossils out of hunks of limestone - one other family stopped in while we were there. I don't know whether they're typically busier than that on a Monday afternoon during school holidays or not. 

We arrived in Tekapo late in the afternoon. The salmon farms on the way through the lakes had all already closed for the day when we drove by - their hours were shorter than expected for school holidays. 

And we headed out to Tekapo Springs in the morning. 

If there are prettier skating rinks anywhere in the world, I've never heard of them. You can look out over the mountains while skating. 

Tekapo Springs was heaving with people. We arrived at 10, when they open, but they'd clearly had people queuing for rather some time before - it wasn't until maybe 10.30 that we'd gotten through. We managed to get a 2.30 booking for the snow tube run. I skated with the kids; Susan mostly hung out in the hot pools. It was busy the whole time we were there. 

That night, we were completely unable to get any table at any restaurant in town. Everywhere that was open was fully booked. We had wanted to go to the Dark Sky Diner, but it had closed at the start of Covid and has not yet re-opened. Every other restaurant was completely full, so Four-Square provided dinner. 

Wednesday we drove up to Roundhill for more skiing. I'd never been there before. It was absolutely perfect. The ski field was busy, but not crazily so. The snow was good. The granddaddy of all rope tows up to the expert slopes was not yet open because there wasn't enough snow on that slope yet, but I wouldn't have had the skill to have tried it anyway. 

And the views from the top of the normal runs were passable anyway. 

The place could have handled a few more people than were there, but a lot more would have started getting into congestion issues at the tow bar. I hope that their numbers hold up with school break having finished - the place is spectacular. Just wonderful. 

Thursday we started heading for home. The Friday afternoon ferry meant a Thursday drive up to Blenheim, via the Inland Scenic Route and Geraldine and Oxford. 

Geraldine was very quiet. We had the cheese shop to ourselves - that district would normally have been full of busloads of tourists. Barkers of Geraldine had scaled up considerably since we were last there, with facilities fit for those busloads. It was busy enough with locals, though I wonder whether that will last beyond school holidays. 

We stopped in Oxford for lunch. Oxford is a great little town about a half-hour out of Christchurch. It's always been a bit touristy, with a great weekend market we'd occasionally get out to. We arrived in Oxford at 1 PM on a Thursday and figured we'd try the new and interesting-looking diner. And it had no room at all - bookings only. At 1 PM on a Thursday, in a small town a half-hour out of Christchurch. 

The road back up through Kaikoura is still under construction from the 2016 earthquakes. They're managing it by letting traffic flow one way for 20 minutes, the other way for 20 minutes, and working for 20 minutes. But they are managing it superbly. A smiling worker comes by to explain the works to each car, when traffic might start moving again, and to point out the portaloos near the front of the queue. He didn't, but could have, pointed out the seals that made for excellent companions down the roadside cliff at the rocky beach.

Blenheim seemed busy enough. We got the very last table at Gramado's, next to the motel where we stayed the night. 

And we caught the ferry Friday afternoon after spending a bit of time at the Picton aquarium, where we got to pat a tuatara. It too was as busy as we've generally seen it on prior trips - but perhaps lighter than you might have thought for school holidays. 

Overall, the tourist-facing places that cater to international tourists in particular looked to be in rough shape - Oamaru's Victorian district in particular. But those catering to locals were throbbing. That will ease back as school holidays are over, and may erode further with the end of the wage subsidy scheme looming. 

Continuing to prop up tourist ventures catering to international tourists makes little sense if the government isn't able to set arrangements at the border to safely facilitate more people coming through. The link goes through to my piece this week at Newsroom that previews some of the things I talk about in the report we're releasing overnight.

Normal arrangements cannot be resumed; any safe opening requires at least managed isolation of incoming internationals, and that will prevent the kinds of tourism we've previously had from coming back. But there is a lot that could be done, safely. 

Tourists would never self-isolate for two weeks. But half of the US workforce shifted to remote work during their lockdown, and if even tiny proportions of them were able and willing to shift their remote work to New Zealand, bringing their jobs with them, it would bring life back to a lot of places. There would still be a big reduction in visits to the really tourist-facing places. Fewer visitors each spending a lot longer here will visit each of the sites once or twice; the bus loads of tourists that came through spending a couple weeks here visited each of the sites once. Even if the total number of international-nights spent here were the same, the traffic at those facilities would be well down. But the cafes and bars would be doing rather well - and not just during school holidays. 

I wonder how many US tech workers would be happy to flip from the nightmares there to hang out for a year in Oamaru, or in Napier, or in Cheviot, or anywhere else here where the internet is speedy enough.

As of 15 July, Our World in Data had New Zealand's Covid restrictions as being among the least restrictive in the world. Tighter restrictions earlier mean we're incredibly free now. We've always been the Outside of the Asylum, it's more true now than ever. 

It's sad. In America, and a lot of Australia, they rail against facemasks as being intolerable restrictions on freedom. We had a lockdown, and we can live more freely than folks can anywhere else. We have to keep the borders safe. But surely there are ways of letting a few more come in, at their own expense, to enjoy the serenity. 

I wish that I had been able to convince more of my friends, before all of this, to join us here. 

Sunday, 5 July 2020

Bayesian updating and deities

Maybe we should upweight the chances that there is a deity - one that cares a lot about poetic justice.

Last year, a Bottle-O bottleshop tried to set up in Khandallah Village.

The shop was opposed by a pile of local NIMBYs. 

Among the objections raised were that:
  • The branding was too down-market for snooty snooty Khandallah. Maybe if it was a Glengarry instead of a Bottle-O.
  • That young children walk through the village and while they wouldn't be able to purchase alcohol, they'd see unhealthy things being sold and that would damage their fragile little minds.
  • That the nearest bottleshop is only 1.2 km away, which is probably already too close in Ngaio; there's also one over in Johnsonville. Surely nobody could be inconvenienced by having to walk 1.2 km to get their alcohol. And, there is already beer and wine in the local supermarket.  
  • Maybe disreputable types - persons of low quality - would take the train to Khandallah and sit in the little park and drink alcohol there. [Heavily racist overtones in the Khandallah town hall meeting, we all know what you meant, you horrid elderly lady.]
Imagine that you were a poetic justice God. What would you put in that spot?

Walking through the village today, I finally saw a sign over the window.

25 paces from the Hell's Pizza, we will have a Dominos.

Tuesday, 30 June 2020

Wealth and the life cycle

It's frustrating how hard it is to know some perfectly knowable things.

Over the weekend, the Greens announced that they support a wealth tax on individual net wealth in excess of $1m. 

In a country that had sensible priorities for its statistics department, I would have an easy time answering a simple question. Fixing the underlying problem here I understand to be a big job. But it would be a solution to problems that just keep coming up - not just this one. And it isn't like there aren't other things that the government has tasked Stats with doing that seem rather less important than fixing this problem. 

I would like to know the distribution of wealth by age bands. The 2018 wealth module of the Household Economic Survey has information on the distribution of households by net worth bands, and household net worth by household characteristics, and by a few other ways of slicing the data that would have occurred to a Stats analyst might be useful when they did the thing up in 2018, but nothing that can let me look at it by age. I don't blame anyone for not having this slice in - there are huge numbers of ways of slicing the data and it would be impossible to have all of them up in every release. 

In a system that had functional back-end systems, you'd be able to put in a query and it would just spit out the relevant cross-tabs - generating them on request from the underlying data. IPUMS has had this kind of functionality for ages - you can even run regressions on their data from inside your web browser.

Here, I can't even tell the age distribution of the 216,000 households with net worth in excess of $1.5m - the topcode in their income buckets. 

Why does this matter?

Imagine two states of the world. 

In state of the world A, 5% of individuals have net assets in excess of $1m. They are born with those assets endowed by bequest, and they die leaving those assets to their kids. Nobody else ever accumulates net assets in excess of $1m. There's a landed gentry, and everyone else. 

In state of the world B, 5% of individuals have net assets in excess of $1m. As people move through the life cycle, they move from being net debtors to net asset positions, and retire at age 65. Their wealth holdings peak around then, with draw-downs exceeding the return on their investments. 5% of people are aged 65-69, and every one of them has assets in excess of $1m when they retire, before they start drawing it down. They're all back below $1m at age 70.

We are absolutely not in either of those states of the world. But static numbers on wealth accumulation say nothing about the life cycle. The presumed equity considerations around a wealth tax would have to be different if small numbers of people are ever subject to it as compared to if large numbers of people became subject to it as they reached retirement. In state of the world B, a wealth tax transfers money from individuals' future richer selves to their current poorer selves in an overlapping generations sense, but where people tend to save money in anticipation of retirement it's an odd way of running things. The rest of the system (NZ Super) is designed around taxing people when they're working to help them fund their retirement. Not the other way round. 

Some of what Stats has is suggestive: couple-only households (retirees will be more likely to be couple-only) have median wealth of almost double that of couples with dependent kids. But that's highly imperfect - professional couples without kids will almost certainly find it easier to accumulate wealth if they don't have kids. And, even if you just lumped together everyone over 65, that would also catch lots of people who'd substantially drawn down their savings. The median across that bigger group wouldn't be the right answer either. 

While it would be nice if Stats would pull the number for me - I've requested it, and I understand that there's a two-week lag these days on custom data requests - it's still not a solution to the general problem. It's just frustrating that back-end systems have not been updated so that cross-tabs like this can be generated dynamically by users on the web interface, rather than by specialised request. Fixing this kind of thing once would save the custom data team a lot of work. It's impossible to anticipate all the cross-tabs that might wind up proving useful down the track; adding more tabs to downloaded excel sheets isn't the answer and can't be the answer. The systems need to be fixed so that things that are dead simple to know in principle can actually be known. 

In an election campaign, two-week lags for basic fact checking about the contours of policy can be an awfully long time. I'm not blaming the team at all for it - Stats is always crazy helpful. But the system really needs to be fixed so that things that should be knowable at a click on a browser don't require custom data pulls. 

Tuesday, 23 June 2020

Bootleggers and baptists - art restoration edition

Suppose that after some home mechanic botched a restoration of a classic one-of-a-kind Ferrari, an association of panelbeaters demanded regulation making sure that only Registered and Authorised Panelbeaters were allowed to do any bodywork on classic cars.

It'd be pretty obvious rent-seeking, right?

Conservation experts in Spain have called for a tightening of the laws covering restoration work after a copy of a famous painting by the baroque artist Bartolomé Esteban Murillo became the latest in a long line of artworks to suffer a damaging and disfiguring repair.

A private art collector in Valencia was reportedly charged €1,200 by a furniture restorer to have the picture of the Immaculate Conception cleaned. However, the job did not go as planned and the face of the Virgin Mary was left unrecognisable despite two attempts to restore it to its original state.

The case has inevitably resulted in comparisons with the infamous “Monkey Christ” incident eight years ago, when a devout parishioner’s attempt to restore a painting of the scourged Christ on the wall of a church on the outskirts of the north-eastern Spanish town of Borja made headlines around the world.
An art prof who once headed the relevant professional guild provided the baptist case:
Carrera, a former president of Spain’s Professional Association of Restorers and Conservators (Acre), said the law currently allowed people to engage in restoration projects even if they lacked the necessary skills. “Can you imagine just anyone being allowed to operate on other people? Or someone being allowed to sell medicine without a pharmacist’s licence? Or someone who’s not an architect being allowed to put up a building?”
Would you allow just anyone to tinker with a classic car in the garage?

I see no more public interest in protecting individual works in private hands than there is in protecting classic cars, or older houses. If there is some compelling public interest, the government can buy the things and make them museum pieces, or pay the owners for an easement that comes with conditions around public display and care. Otherwise, it's nobody else's business. And the art-restorers are here acting as rent-seekers. 

HT: A friend who comments "I personally have benefited more from the Monkey Christ restoration than every other work of religious art in Spain."

I think that friend may be right in total too. The modal piece of religious art in Spain of similar vintage is practically unviewed, relative to Monkey Christ. Pop quiz: can you even now, without looking back up, even remember the name of the artist in this case, or of the artist who painted what became Monkey Christ? The Guardian piece linked suggests that more people now go to see Monkey Christ than did before too. Be honest. You wouldn't be able to pick the original version of Monkey Christ out of a lineup of a dozen similar pieces. Sure, a few art experts might, but neither you nor I would. But it would be hard not to know this one, and its backstory. 

Thursday, 18 June 2020

Risk assessments and quarantine exemptions

The past few days have not brought a lot of confidence in New Zealand's quarantine system. It's been a mix of operational failures and poor decisions that have, so far, culminated in an ending of allowing early release from quarantine on compassionate grounds where accompanied by a safety plan around that release. 

Some of the safety plans around those compassionate releases have sounded really rather reasonable. Leaving quarantine early, staying in isolation in a private vehicle, then staying in a new private isolation bubble with the family member you have good compassionate grounds for needing to go to see doesn't sound all that high risk. Even where the travelers wind up COVID-positive, it should only affect those travelers and the one additional person. That case wound up falling apart in practice, especially where they hadn't bothered with testing before release, but even with failures it seems the kind of thing that can easily be contained through contact tracing - or at least in principle. It doesn't sound like the kind of thing that gets us back into lockdown. 

In the best case, officials would have ensured that the private vehicle used for travel either had sufficient range to make the trip from Auckland to Wellington or a few jerry-cans of fuel in the back, or that any fuel stops would be at unmanned stations and only when no one else was there and only with masks on and only with cleaning of any surfaces touched... ok, it quickly starts sounding pretty implausible in practice and it all should have raised a few queries about whether it seemed likely that safe practice would have been maintained. But it all seemed relatively low risk in the grand scheme of things. Even if those travelers turned up positive, the consequences would be relatively limited. 

But I just don't get what anybody was thinking in allowing early release from quarantine to attend a gang funeral. 

In any early release where there's risk that the person is infected, there will be risk if people don't follow the plan. And the plan in this case required staying in the car during the funeral. 

But in any of these, there will be different risks that obtain if the plan isn't followed. Even if the probability of failing to adhere to the safety plan's requirements is identical across people released, the risk imposed by failure at a gang funeral is just far higher than the risk imposed at other kinds of events involving even the same number of people. 

This seems pretty obvious. 

A gang funeral, whether it's a Mongrel Mob funeral, or a white power one, or any other gang funeral, will have a lot of people in attendance who will make contact tracing close to impossible. No everyone, obviously. Plenty of non-gang family members or acquaintances might also attend. But enough

Just think through the logistics for a minute of trying to run contact tracing if anything went wrong in the safety plan and folks got out of the car, mingled with guests at the funeral, and then turned up COVID-positive. 

If that happened at any funeral, the contact tracing team would need a guest list, would need to get in contact with each person who attended, would need to ask each of them who'd been in close contact with the case to get tested and stay in isolation until they'd gotten their results, and potentially also to provide contact details for each person they'd been in close contact with since the funeral. 

Thinking though actually doing that for a gang funeral immediately leads to a few complications. 

First, you need a guest list. 

Some in attendance at a gang funeral may well be there in contravention of a parole condition not to associate with other gang members. If those orders are broken at a funeral, would anyone in attendance be willing to name everyone else who was there who the contact tracing team might need to find? Even if there had been no breach of any such order, getting any complete list of guests in attendance, along with reliable phone numbers for fast contact tracing would very likely prove impossible. 

Tracking down each of the people whose names you did get would be very hard.

You might also expect a rather more difficult time than usual in getting any of those you found to name any of the people they'd been in close contact with since the funeral. 

The contact tracing team would need to encourage all close contacts to be tested, and to maintain self-isolation until test results had been released. Compliance could easily be a bigger issue in this case than would be the case for other funerals.  

Obviously these problems wouldn't obtain for each and every guest in attendance. There would be many in attendance happy to comply. But surely the proportion of likely difficult cases would be enough to make the whole thing seem just a bit of a bad idea. If someone did authorise it, you'd almost have to wonder if they just hated the contact tracing team. Because if anything went wrong, getting a large regional cluster seems rather easy, and getting that cluster of cases under control would seem rather hard. It is really easy to imagine it leading to at least a regional-level lockdown, or worse. 

Here's what happened. None of it seems sufficiently low probability that the folks setting the plan should have discounted it as a potential outcome, and the cost of all of it if one of those on leave from quarantine had been COVID-positive and contagious would have been rather high.
Two people who fled from authorities, breaching their Covid-19 quarantine restrictions, had been granted special exemption to attend the funeral of a Mongrel Mob relative in Hamilton.

The Herald understands the pair, aged 8 and 19, flew with four other family members, including their mother, from Melbourne, before being granted an exemption to attend the tangi of slain gang member Deiderick John Grant, known as DJ Rogue.

The 57-year-old was killed at a Slim St, Bader, property on June 5.

The family are believed to have flown to New Zealand to be with their whānau the following day.

The pair were given strict instructions to follow as part of their compassionate exemption, including to remain in their vehicle on the journey to Hamilton - and to wear personal protective equipment (PPE) if they got out. They are also understood to have been told to stay in the vehicle during the tangi.

They were then required, with their other family members, to return to the quarantine hotel, the Pullman, in Auckland afterwards.

Instead, the pair fled.

And last night former police commissioner Mike Bush claimed six members of the Australian family had absconded, though five were now back in isolation at the hotel.

When questioned by the Herald last night, the Ministry of Health revealed the two youngsters had now tested negative.

"The six members were staying at the Pullman Auckland in managed isolation and were granted exemption on compassionate grounds to attend the tangi and return to the facility on the same day.

"Four members of the family returned. A teenager and a child did not. The child was returned to the hotel managed isolation and quarantine facility in Auckland.

"The teenager remains in self-isolation at a family property. The teenager in self-isolation in Hamilton has had a Covid-19 test and tested negative.

"The five family members' request to join the teenager has been declined and they will complete their isolation at the managed isolation and quarantine facility in Auckland."


The person [an unnamed source who contacted the Herald] said the family came over from Melbourne to attend Grant's funeral.

"As soon as these kids have left the isolation centre, with their mother who was also part of the set up, they've just gapped it.

"They've breached all of the conditions of their agreement that was set up and just disappeared."

The condition for the mourners to stay in their vehicle at the tangi was "never going to happen", the person said.

"It was just ridiculous."

Hundreds of mourners from all around the North Island were believed to have attended Grant's tangi last week.

The source said the boys, and the rest of their family, mingled with them all.

"The ridiculous thing about the Mongrel Mob funeral in Hamilton ... you could see how many hundreds of people there were there ... these boys who essentially just came in the country from Melbourne were mingling all in amongst those people."

Another condition of being granted an exemption is to provide two addresses of where they would be staying. One would be a back-up.

The source claimed the first address provided to authorities was fake, while their back-up address was Slim St, the property where Grant was killed.

It led him to believe that the addresses provided by visitors were not being verified before their exemptions were granted.

"If that's the security we're providing ... it's just an absolute joke. They should be asking, 'what is the risk here?'"

He said asking families to wear PPE at all times was also "completely impossible" and said the ministry needed to up its game to protect New Zealanders.

"This is the thing, there's how many billions of dollars that's going to be spent, how long it is it going to take for the country to get back on track? How many people have lost their jobs? There's people who have committed suicide.

"It's crazy, and yet I'm guessing it's the Ministry of Health, as they're the lead agency, are prepared to throw it all away for these guys to come over for a Mongrel Mob tangi?

"It actually frightens me about how incompetent these people are."
Read through the account a couple of times. It's always possible that the account is exaggerated or wrong, but none of it is implausible, and I'd expect the Herald to have done some checking. And the very bad consequences of any breach of conditions, if those travelers had been positive, should have been obvious too. 

If the folks on early release from quarantine had been COVID-positive and infectious while mingling with hundreds of attendees at a gang funeral - attendees who had come in from across the North Island, would it be possible to get the consequences under control without another lockdown? 

If officials had any kind of discretion in granting compassionate exemptions like this, why did the very obvious red flags not prompt a refusal of permission to leave quarantine early? The risks if the plan were not followed were far far greater than the risks involved in allowing two people to travel from Auckland to Wellington to share a self-isolating bubble with a single family-member. And there just might be reason to think that those attending a gang funeral might be less likely than average to follow an unmonitored safety plan. Twitter reaction to my incredulity over this case suggests the officials might have feared being called racist for even thinking that a gang funeral might be of a different category of risk than a non-gang funeral. 

I often say we don't know how lucky we are in New Zealand. In this case, we are incredibly lucky about which case turned up unlucky. If the travelers from Melbourne had wound up Covid-positive rather than the travelers from London, things could be very very very worse. 

We need better processes if we don't want to keep testing our luck. 

Tuesday, 16 June 2020

Plasma compensation

Kerre McIvor over on Newstalk had a bit of a go at me on the issue of compensating plasma donors. She worried about that facilities paying for plasma would locate in and prey on poorer communities.

I think that gets things entirely backward, and is beside the point even if it didn't get things entirely backward.

It's beside the point because gaps in NZ's supply are currently made up from donations by compensated plasma donors in the United States. Prohibitions here just shift the location of the paid person, and if you have any reason to expect that whatever ethical checks there might be on practice around donors would be stricter here than there, then you should want it to happen here rather than there. Note that I have zero concerns about practices in the US either though. 

But more fundamentally, if your view of the world is that there are some people in such desperate circumstances that they'd turn to plasma donation as a last resort, and that they need to be protected against that somehow because the horrors of giving plasma are just too risky to be encouraged by anything as dirty as cash, I just have trouble understanding that whole line of argument. If someone's conditions are that bad, how can banning that person from accessing what they view to be their best option be in that person's interest? Surely the better answer is to find other things that might improve that person's circumstances. There aren't really that many cases where banning people from their best alternative really makes them better off. 

And plasma regenerates in two days. The ban doesn't prevent someone from going and doing some giant irreversible thing out of some desperate circumstance. It prevents them from making maybe $30 or $50 for spending an hour on a machine that takes some of their plasma. It's not like "Hey, I hear you're desperate. Can I have one of your eyes?" Plasma sorts itself out. And if you're the sort of person for whom plasma doesn't sort itself out, pretty unlikely you'd make it through the medical checks to be a donor (and you might even then find out about something that you need to find out about). 

If it's of any interest, here's one of the Canadian centres that pays for plasma. The payment structure is rather neat. Plasma regenerates after 2 days; they require at least 2 days between visits (no more than 2 visits per week) and pay more for the second donation. The whole structure is geared around encouraging repeat visits. Why would that make sense? There are going to be big onboarding costs with any new donor. They have to screen donors and go through a pile of health checks. After those are through, ongoing monitoring is easier. So the centre's costs will be sharply declining in the number of donations per donor. The worst thing would be dealing with a giant surge of one-off donors motivated by some publicity campaign. You want repeat donors. 

So here's the compensation structure:

First donation of the week: $30.
Second donation of the week: $50.
After your 25th donation: $25 lump sum bonus, and an extra $4 per donation.
After your 50th donation: $150 lump sum bonus, and an extra $5 per donation.

If you made 100 donations in a year - take two weeks off for holidays - you'd be on $4529 for the year for 150 hours' commitment. Better than $30/hour, for hanging out on a table catching up on your reading. 

I just don't get folks who'd consider that to be exploitative. It's an utterly alien mentality. If that's exploitative, what about someone desperate for money who takes any job that's riskier than donating plasma and pays way less? Is there anything that shouldn't be banned, if that's your view of exploitation? 

There are variants of this stuff that seem worth taking seriously. Mike Munger's discussions of voluntary versus euvoluntary exchange are fruitful. But banning compensating plasma donors because of invented concerns about coercion isn't that. 

Monday, 15 June 2020

Bloody Well Pay Them

Georgetown's Peter Jaworski's produced an excellent report on the need for compensation for blood plasma donors. The report was released yesterday by the Adam Smith Institute, in conjunction with the Niskanen Centre and the Australian Taxpayers' Alliance. 

Despite New Zealand’s prohibition on donor compensation, or perhaps rather because of it, about an eighth of New Zealand’s needs for plasma therapy are filled by imported American supplies that rely on compensated donors. The New Zealand Blood Service’s May 2020 Annual Statement of Performance Expectations considered the annual increase in demand for immunoglobulin (an important plasma product) to be “not considered sustainable”; imports are expected to make up over 15 per cent of New Zealand’s needs by 2022.

Reliance on American blood plasma products is even heavier elsewhere: the report tells us that America now supplies about 70 per cent of global need for plasma product – in part because American companies have expertise unavailable in developing countries for providing safer products, but more fundamentally because donor compensation helps ensure sufficient supply.

Developed countries with no shortage of expertise also rely heavily on American plasma imports.

The report tells us that the United Kingdom, which prohibits donor compensation, relies almost entirely on American blood plasma products; imported American plasma product meets over 80 per cent of Canada’s need for plasma therapy – and over half of Australia’s.

In one sense, there may be nothing particularly wrong with this.

Some people, particularly medical ethicists, think it is fine to pay phlebotomists to collect blood but that it is wrong to pay the people providing the blood or plasma.

Those with such views get to be happy that policy accords with their sense of morality – so long as they don’t look too closely at where we wind up finding plasma products instead. And ability to access American markets where donors are compensated means that we in New Zealand are less likely to fall short despite our country’s ban on donor compensation. But there are other and worse consequences.

The ASI report argues that bans on donor compensation in places like the UK, Canada, Australia and New Zealand, which are perfectly capable of making their own immunoglobulin products, push up the price of plasma products for poorer countries without those capabilities.

Saturday, 13 June 2020

Dear Prudence: Welcome to my Nightmare

My Newsroom column this week worries about the government's abandoning of normal measures of fiscal prudence

Prior to all of this mess, the government's targeted prudent debt levels were 15-25% of GDP. It made a lot of sense in a country subject to substantial risks. Treasury had always figured there had to be room to accommodate one big crisis or two minor ones within a maximum debt to GDP ratio of 60%. We're going to be hitting 53.6% in 2023 and 2024 - low by some standards, very high for a small country that likes to be able to borrow in its own currency and without backstop from someone like the EU or ECB and with very high levels of private debt from foreign lenders. 

And that could be fine if every single dollar of it were absolutely needed in Covid response. But there's been a ton of spending in and since the budget that has little to do with Covid, or mitigating its economic consequences, and absolutely no effort to reprioritise spending from other areas. 

And that's putting us close to a terrifying cliff. 

Remember that we need headroom more than other countries. A big earthquake hitting one city in a country with dozens of major cities is more manageable than one hitting Wellington, or Christchurch, or both. 

Here's my nightmare. Welcome to it. I hope that it's just dreamland stuff and that Treasury's Debt Management Office has done a whipround suggesting that there'd be appetite for further debt on reasonable terms even up to much higher ratios. 

But here's the nightmare nevertheless.
In 2023 the Alpine Fault opens up, as a foreshock. Damage is substantial enough to trigger reinsurance, but GNS predicts a high probability of a bigger earthquake to come - and the Wellington Fault is also under pressure. Kinda like September 2010, but bigger because it's the Alpine Fault, and with higher probabilities of a February 2011 to come.

The debt-to-GDP ratio is already around 54% of GDP. While Treasury and others had been comfortable with those kinds of debt levels because credit agencies said everything was fine and because nothing obvious was happening in the spread between inflation-indexed bonds and standard ones (not that any such spread could open up under QE), there's a very very big difference between international agencies' assessments of creditworthiness for marginal changes around one debt level and appetite for lending another 20% or 30% of GDP. Treasury's modelling had always said to leave room for another 20% in case of a Wellington earthquake; GNS worries that Wellington and the whole South Island are ready to go - say 40% chance of a bigger quake hitting both. Reinsurance obviously becomes absolutely unavailable. The entirety of the predicted shock will hit the government's books because the government backstops EQC and EQC has basically nothing in reserve consequent to the Christchurch earthquakes - or at least nothing relative to the scale of what's expected. Either the government will be taking on more debt to cover EQC's liabilities, or it will find ways of short-changing claimants in ways that would make EQC's Christchurch record look positively generous. 

The government puts a good face on it, reminding everyone of NZ's strong reputation for fiscal prudence and that we're a sound borrower. But quietly, in the background, all of the usual larger buyers of NZ government debt are telling the government, a bit sheepishly, that they're just not able to help us out this time. The risk is too great if the government needs access to another 25% or 30% of GDP on top of its current borrowing. It's been able to get through the foreshock, but if the bigger one comes, things are going to be rather dicey.

In 2024 the bigger one comes. The government needs to take on the debt but knows it has no buyers. Its options are not good. JP Morgan, or a comparable agency, comes round and says "Look. We know you're in a tight spot and we can help. Here are the terms. I expect you'll find them hard to refuse. Your extra borrowing is now denominated in other peoples' currencies because we all know you'll be too tempted to devalue your way out of this mess at these levels. And the interest rates will be high because of the risk. You'll find those interest rates become even higher in real terms for you if your dollar drops in the ways you might need it to to sort things out. You can likely expect that any old debt you want to roll over will likely have to take on similar conditions, at least until you've gotten things back in line. You're going to be back into the world of the 1980s in which the government was spending over 6% of GDP as financing costs on debt. But you really have no other option. It will take you a good couple of decades to get out of it, even with tight control on your spending, and you and I both know that you've forgotten how to do that. You're going to have to learn it again. The Gods of the Copybook Headings have limped up to explain it once more. They always do. They're reliable like that.
The odds of the scenario are low because the odds of the Alpine Fault opening up in any particular year are low. Last time I asked GNS about the risk of the Wellington Fault opening up, it was on the order of 0.83% per year. But it's overdue. It could happen tomorrow; it could happen in fifty years. The longer it takes to get debt-to-GDP ratios down to levels where the government can stand to take on an additional 20%+ of GDP in borrowing, the more likely it is that the earthquake comes before the books are ready for it. If they're projecting ratios of 42% by 2034, well, that's not prudent.  

We must be feeling awfully lucky, if the government is running its accounts the way it currently is. Again - none of this is argument against taking on debt to deal with the pandemic. This is rather argument against the current very lax spending controls in areas unrelated to pandemic response, and the push from many quarters to implement measures that will make it harder rather than easier to grow our way out of this.  

I desperately hope the Debt Management Office at Treasury has had its chats with the usual suspects and that I'm entirely crazy to be worried about this. If they're all very happy to continue with normal kinds of practices up to 80% or 85% of GDP, then I'd sleep easier. 

The Government’s projected path for paying off new Covid debt is very slow, and predicated on some perhaps optimistic assumptions about core government spending returning to more normal levels after 2024. Combined with its willingness to take on more debt to fund ongoing initiatives like higher pay in childcare centres and expanded school lunch programmes, it appears the solid bipartisan consensus about prudent debt levels has been broken.

Before Covid-19, the targeted net core Crown debt range was 15 to 25 percent of GDP. During the budget lockup, Finance Minister Grant Robertson was asked if his projected debt levels in 2034 represented a “new normal” for prudence, or if he expects a continued slow path back to pre-pandemic levels. Unfortunately, he declined to answer – simply defending the new debt as necessary and prudent.

But prudence in a crisis like this also requires making it easier to win back the necessary headroom for dealing with future misfortunes. Treasury’s modelling was based on the likely need to increase debt by about 20 percent of GDP should Wellington be hit by a major earthquake. Since no one knows when a geological fault might open up, taking a decade or two longer than necessary to win back that headroom seems just a little imprudent.