Cracks appear in coalition as Adrian Orr warns of further pain

Wednesday, 27 May 2020

Reserve Bank Governor Adrian Orr talks about the financial future of New Zealand, post Covid-19.

The first cracks in the Government's “Unite against Covid-19” campaign started to appear yesterday with Deputy Prime Minister Winston Peters declaring that New Zealand should already be down at alert Level 1 and that the economic fallout from Covid was now the enemy, not the virus itself.

On Monday, Prime Minister Jacinda Ardern said Cabinet would begin looking at the Level 2 settings on June 8 and would make a decision on whether to move to Level 1, no later than June 22.

“We are keeping watch on how we are tracking in the meantime,” she said.

Peters’ intervention came on the same day as more dreary economic data piled up. A new survey found that nearly 80 per cent of households are on the edge of a financial crisis, and the Reserve Bank Governor warned that economic conditions will likely get worse before they get better.

* Coronavirus: Winston Peters says NZ should already be in level 1 with trans-Tasman bubble

* Coronavirus: Kiwis' economic pain a big challenge for NZ banks, says RBNZ

In an interview with Stuff, Reserve Bank of New Zealand Governor Adrian Orr said that the range of possible outcomes for growth, jobs and pay packets in a post-Covid world are so broad that the Governor said the RBNZ couldn’t even estimate an unemployment rate.

Deputy Prime Minister Winston Peters and Prime Minister Jacinda Ardern are at odds over when to move alert Levels

“We don't have a current best guess because the guesses are just so broad at the moment we'd be foolish to put a prediction,” Orr told Stuff from the Reserve Bank building on the Terrace in Wellington.

But the Governor said that a number of the banks’ possible scenarios contained within its quarterly Monetary Policy Statement - including a disastrous 18 per cent unemployment rate - should serve as a cautionary warning, particularly to the banks

“But let's not get complacent, let's really scare ourselves and let’s make sure the banks understand what those numbers really feel like.”

While Orr was confident that New Zealand would pull through the upcoming crisis, the economy will get worse before it gets better.

“I actually think it's going to be, for the next few times that we meet … it will be worse still. The harder stuff will be ahead if us in the economic sense, I really hope it's not worse in the health sense,” Orr said

The Governor’s comments came after Peters, whose NZ First party has been languishing below 3 per cent in the last two public opinion polls, put distance between himself and Coalition partner Labour, slamming Labour for dragging out the lockdown and continuing onerous Level 2 restrictions.

'We have been in compulsory lockdown for far too long,' Peters told Newstalk ZB yesterday, remarkable claiming that NZ First had pushed the Prime Minister on the issue around the Cabinet table. Cabinet discussions are usually confidential.

'The Prime Minister has actually admitted that, at the Cabinet meeting she said it, there was serious concerns from New Zealand First that this was taking too long,'

'The enemy we've got now is not Covid-19, it's the inability to turn this economy around as fast as possible,” Peters said.

'We should have got out of this into a better place as soon as possible.'

Both Peters’ and Orr’s warnings came as a survey by the Commission for Financial Capability shows that almost 80 per cent of New Zealand households say they are either in or close to a personal financial crisis caused by the continued fallout of the Covid-19 crisis.

Already one-in-10 New Zealand households had missed a mortgage or rent payment since the crisis began, according to the Commission for Financial Capability which questions 3000 New Zealanders

The survey found that the impact of the Covid-19 lockdown and recession was falling hardest on young families, Maori, Pasifika and those in short term or casual work contracts.