26 Jun 2020

After the Virus: The Economy

From After the Virus, 7:00 am on 26 June 2020

Sir John Key says he ‘runs out of adjectives’ when trying to describe the size of the economic crisis caused by Covid-19.

The former prime Minister made the comment to RNZ’s Guyon Espiner for the podcast After the Virus, which hosts discussions with New Zealand and international experts about the post-pandemic world.

Sir John said the twin health and economic crises facing the world made it a more pronounced problem than the 2008 Global Financial Crisis (GFC), and pointed to China's weakened economy as a factor in the severity of the current crisis.

"[In 2008] China was in much stronger shape and really was a part of the equation that helped the world out of the GFC."

Sir John said one bit of good news was the banks were in a stronger position compared to 2008.

"To me in my mind, the big challenge ultimately will be how quickly can we get to a position where we can return to some sort of normality. Will that take a vaccine and will we deliver one? And ultimately when will confidence return to the consumer?"

Ecological economist Dr Simon Mair and economist and writer Philippe Legrain also appeared on the podcast.

Legrain agreed with Sir John that the current economic crisis was ‘an order of magnitude bigger’ than the GFC and went on to describe the optimism in some financial markets for a v-shaped recovery as "completely delusional".

"The idea that you can simply shut down an economy and suddenly just flick a switch and it gets going again I think is not true."

Legrain said he thought the aftershocks from the current crisis could last for a decade.

"If you ask the ordinary person in the street how they see the future it’s never been more uncertain."

While agreeing that a v-shaped recovery was unlikely, Simon Mair said he didn’t want to see a return to normality, as that would underplay the role that economic systems had in preventing a rapid response to Covid-19.

"Given that we know with things like climate change, other crises are coming, I think a return to normality is a mistake."

‘What we need is a real transformation to a more resilient economy.’

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