Eric Crampton: NZ Initiative Chief Economist on the Treasury report revealing the cost of the Covid-19 pandemic to be $66 billion

An economist says the Government did the best it could in the early stages of the Covid-19 pandemic.  

The Treasury's latest report calculates the total cost of the Covid-19 pandemic at $66 billion.  

The Government ignored official advice at the time to ease spending.  

New Zealand Initiative Chief Economist Eric Crampton told Mike Hosking it is hard to fault anyone up until late 2020.  

He says, afterwards, the Government failed to come up with solutions outside lockdowns and wage subsidies.  

Treasury is now suggesting the Government establish an independent fiscal institution for better scrutiny.  

Crampton says Treasury isn't in a position where it can effectively challenge the Finance Minister's decisions.  

He says the public currently can't rely on Treasury for clear warnings when things are going wrong, which is needed for democratic accountability. 

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Episode Transcript

Speaker 1 (00:00):
Back to the Treasury report that lias by just how
ruinous they Adrean Hipkins Robertson campaign of spending was during
the last years in office. They ever cooked the books,
ignored official advice, and here we are still trying to rectify.
The mast titled Spain was sixty six billion, the second
largest fiscal intervention in the world of a twenty percent
of GDP. Doctor Eric Crampton is the chief economist at
the New Zealand Initiative and as Beck, well, this is

(00:21):
Eric morning, Good morning. I think most of us have
probably worked this out, but this is proof positive of
what a miss it was, isn't it.

Speaker 2 (00:28):
Yeah, About half of the spending during the COVID period
really was not well targeted towards anything having to do
with COVID. It was largely wasted. There were warnings at
the time. Treasury could have been more forthright at the
time about those warnings. The document now is great. They're
putting up all of the problems that we had at
the time. If we go back in time a little bit,

(00:49):
in twenty twenty one, Treasury was saying pretty publicly that
fiscal policy was wonderful, that it should be included in responses,
they seemed to have forgotten the difficulty of scaling the
things back. It's great that they're remembering it now. I
hope that we remember it in future. The one really
useful recommendation in there is for an independent fiscal institution.

(01:11):
So this is something that the Initiative has been arguing
for for some time, and Treasury quietly makes the case
for in this piece as well, where they note that
Treasury's job isn't just doing forecasts and a little bit
of public comms around it. It's also to be a
trusted advisor to the Minister of Finance. So if the
Minister of Finance is doing something really dumb, it is

(01:34):
hard for Treasury to tell everybody that the Minister of
Finance is doing something really dumb because they have to
maintain trust with the minister. That means that we can't
look to them for the clear warnings that we need
for democratic accountability. You need to have a different agency
in that role, advising Parliament and the public more broadly,

(01:56):
when things are going wrong.

Speaker 1 (01:57):
Who do you think is ultimately blind? Because one of
the great crisis at the time was they spent they
spent nine years in opposition on their hands, didn't have
a plan for government, then panicked and relied on officials
too much. So where does the blame lie.

Speaker 2 (02:10):
The sorry the list of things that Treasury puts up
as the misguided spending, those look like political initiatives rather
than things that were coming out from the bureaus. There
was no if we think about the shove already jobs
program or shovel infrastructure program, if this had been something

(02:30):
that the bureaucracy had been sort of cooking up forever,
they would have had a list ready of things to go.
That clearly wasn't the case. Instead, it was politically driven
that we needed to get money out the door, and
there's sort of foot grounds around town trying to figure
out how to spend it. So that's not the best
way of approaching things, and Treasury says, well, maybe we
should be devoting this sort of thing to maintenance if

(02:53):
we're going to be doing it in the next crisis.
It looked some bits it did come from officials. The
wage subsidy scheme the first round through, It's hard to
fault anybody for the response up through even late twenty twenty,
they were doing the best that they could in remarkable situation.

(03:14):
They failed then to progress afterwards, and that'll be a
mix of blame between the political officials and the bureaucracy
that they didn't come up with something better than lockdowns
and wage subsidies. Come the next one, and.

Speaker 1 (03:27):
The great question is going forward, and we'll probably never
answer it. Would a lesson like this be learned and
therefore or would depend purely on what sort of government
you have at the time. Appreciate your time, doctor Eric Crampton,
chief economist at the New Zealand Initiative. By the way,
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