What do Victoria and New Zealand have in common?
Victoria and New Zealand are similar in size and population. Their current leaders, Premier and Prime Minister respectively, although of different gender, also share a distinctly leftist (they would say ‘progressive’) orientation and an ardent devotion to every woke cause. In 2020 they have both emerged as anti-COVID zealots, willing to sacrifice any quantum or type of economic and social activity and any civil liberty if that is what it takes – or they think that’s what it takes – to squash the SARS-Cov-2 virus out of existence within their borders.
Coincidentally, fresh evidence of the economic cost of this single-minded zealotry became available on both sides of the Tasman on Thursday.
The New Zealand statistical agency reported that real GDP contracted by a stunning 12.2 per cent in the second quarter, following a 1.4 per cent decline in the first quarter. The chart below puts this 13.4 per cent cumulative first-half decline into international perspective. This updates my chart published in Flat White on September 8, following the news of Australia’s 7 per cent contraction in the June quarter. As well as adding New Zealand, this update also includes new data from India (a 25.4 per cent decline), Brazil (11.1 per cent) and a few others. The chart also shows the index of stringency of COVID restrictions – and the new data preserve the rough correlation between more stringent restrictions and larger declines in GDP previously reported.
New Zealand’s GDP contraction places it as the 14th largest out of the 38 countries shown. Its stringency index is similar to that of other countries with similar GDP declines, but lower than some countries that managed smaller declines in GDP. As previously noted, there are many other factors going into the mix, so the correlation can only be approximate – and in New Zealand’s case restrictions were very severe (averaging over 90 on the index) in the first half of the June quarter before being eased markedly in the second half. Given the lags, restrictions in the first half would have had a lingering impact in the rest of the quarter.
We will never have comparable data for Victoria because quarterly gross state product (GSP) data are not produced. However, we do have the labour force data released on Thursday, which show the story is very much one of Victoria and the rest. In August, employment and hours worked in Victoria fell and unemployment rose, going in the opposite direction to the rest of Australia. That is hardly surprising in view of the government’s imposition of stage 4 restrictions at the beginning of August. But more shocking is the fact that employment and hours worked in Victoria were back to their May lows, whereas in the rest of Australia on average the increase in both employment and hours worked from May to August recovered around 70 per cent of the decline from March to May.
We do not have a stringency index for Victoria, but we don’t need one to know that the restrictions in place since August have been among the most stringent of any place in the world since the pandemic struck, and Victoria would surely be well above 90 on an index scale of 0 to 100.
Australia’s national labour force figures for August looked surprisingly good, but they would have looked so much better without Victoria’s fiasco. But even if and when Victoria comes back into line with the rest of the nation, the jobs recovery in all states and territories, not to mention New Zealand, will still face strong headwinds.