The COVID Diaries: New Zealand lawyer 1
The following interview is with a New Zealand-based capital markets lawyer. It was conducted on 8 April 2020.
Do you feel you have adapted to working from home and how close are you to business as usual?
I think there will be a bumpy ride after this initial phase. Some teams will be very busy and dealing with some calamitous things. For others, the work will probably dry up and then come back again – because this crisis will have a funny shape and different phases.
On the lending side, the focus has switched from origination to servicing. The can has been kicked down the road, but it is a murky road. There is no glimmer yet of what the exit strategy is, what businesses will be viable or anything else.
People seem to have turned their attention to this in the past week. The first week was all about how business could adjust to working from home, the second week was the immediate triage for the economy with regulatory and policy changes being implemented. Now people are starting to think more about how this all plays out.
I hope some good ideas emerge over the next couple of weeks. It is difficult because it is a novel coronavirus, but economic and financial crises as a result of exogenous events are not novel at all internationally. Although they are, to an extent, in New Zealand and Australia, which are rare in never having experienced a systemic financial crisis.
It raises the question of what we can take from the playbook of previous crises.
One thing that will be very interesting is how different countries go about reopening borders. A lot is yet to be known and there is not a lot of structure around how we will get to know these things.
Has your view of the crisis and the nature of the challenges it presents changed? How are you thinking about the trade-off between the health response and the economy?
This is the only response we have available, so we must go for it and then move forward. If we get to eradication, there are options we would not have otherwise, like triggering a domestic tourism boom for example.
There does seem to be a consensus around having the Level 4 restrictions. If anything, there is frustration that we ever had Level 3, at least as it was then designed. What we have learned about COVID-19 is that it is a cauldron disease – if you throw people together, there is the most chance of spread. There was a lot of risk when Level 3 was on and people were still going to school and to bars. One of the biggest clusters in New Zealand stems from one St. Patrick’s Day party in Matamata.
"One thing that weighs in New Zealand’s favour is that it is a village. There is access to the people making decisions and it is possible to advance things up the chain. But the challenges of real time coordination are considerable, as are the ever-present issues of transparency and accountability."
Are you more or less optimistic about the crisis than you were during the early acceleration period of moving to home working and adding social distancing measures?
One thing we have – which is a constitutional innovation – is the epidemic response committee, which is headed by the leader of the opposition, Simon Bridges. This has essentially taken over the role of parliament, which is currently prorogued. The degree to which this can bring another view as well as transparency and accountability is only just starting to play out but could be very important.
There is a lot of interest in how to deliver stimulus and at the same time prevent the health crisis from becoming a very serious economic crisis. Economically, we could be moving to risk-based criteria for businesses to adjust to dealing with COVID-19. There is some merit in that. However, there is no consensus for how to do this at the macro level or for individual businesses.
For me, it is critical that we develop a principles-based framework for dealing with these things. In the financial crisis, a lot of countries implemented unconventional monetary policy and it did not have the intended effect of triggering borrowing for capital investment. What it did was inflate asset prices – which led us to where we are now.
Unconventional monetary policy is now happening in New Zealand and it had to be done, but I don’t think anyone assumes it will inflate the real economy. The government will be writing cheques but the way it does so should be questioned, and the overall direction things are headed should be taken into account.
The fiscal cheque being written is enormous but so is the paradigm shift taking place. We are talking about a new relationship between public and private sectors to overcome an overwhelming and pervasive challenge.
I’m not all that positive on things because I am not sure of the ability of people to adjust to a new paradigm overnight. What you need in this situation is a common playbook, based on principles and a notion of the way forward. I am not sure there is an articulate architect of such thinking. Is everyone up to the task or do people revert to decisions based on narrow self-interest that, when taken together, create damaging outcomes from a macro perspective?
Which of these scenarios you expect to prevail comes down to your belief in the efficacy of government, human nature and a lot of other things.
How do you think things will be different when we get back to normal? What changes can you see to work practices, social changes and the economy?
The low-hanging fruit for the government has been to put on hold or switch off a lot of the new regulation being implemented. If there is a programme that does not concern the economic lifeblood of New Zealand, it is currently on hold.
I think a lot may not re-emerge because it had little merit even at the time it was formulated. When the government steps into the shoes of business and gets its hands dirty, it will quickly realise the folly of the obstructive regulatory regimes it was putting into place.
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