Grant Robertson is already well into what is likely to be a fundamental reconstruction of the New Zealand economy.

This will be no collection of tweaks. Instead, it will be more like one of those pivot points in New Zealand history like 1935 or 1939 or 1984 when the economic ground shifted with all the force of an earthquake.

Assuming Labour stays in power beyond the election (and the odds have to favour that) New Zealand should be starting to look very different by the end of next year.

Robertson has commissioned a series of studies which are being done within Treasury which will shape his outlines of the future.

But he will also reach back to his own Commission on the Future of Work from 2016 as he crafts a plan for an economy that will try to recover the momentum that has been lost because of Covid.

There are, of course, huge immediate challenges.

There will be the need to recover from a recession, possibly depression, caused by the lockdown.

There will be ongoing management of sector disruption caused by closed borders.

But, above all, the world will have changed.

For a start, all those rosy projections of an ever upwards growth path for OECD countries will now point in the opposite direction.

With borders closed, globalisation will be stopped dead in its tracks.

And the state will be playing a very hands-on role in many areas of the economy as it recovers.

Robertson believes you cannot understate the severity of the impact.

“This is a one in 100-year shock to our economy and our society,” he told POLITIK.

“I think that in the face of this kind of disruption and shock, we will have to look very closely at some of the fundamentals of our economy and how we can start responding to that as well.

“The questions we have to answer is of that scale, and therefore our response has to measure up to that.”

He has asked Treasury five questions” what should we make and do here to ensure our sustainability; what institutions do we need to support our economy; what is the role of the state; how do we trade with the rest of the world in this new environment; and how will the financial system, both here and globally, cope?

And he says those answers must be guided by three conditions; sustainability, productivity and inequality.

The questions are big and could invite answers that would challenge the past 35 years of market-driven economic orthodoxy.

So is Robertson inviting Treasury to start from a clean sheet of paper?

“I wouldn’t quite go that far,” he said.

“I think the New Zealand economy is good and it’s got some really strong underlying fundamentals.

“What I’m talking about is significant sectors of our economy that are either not going to be to operate as they were and perhaps not operate that way ever again.

“You know what I’m talking about there in terms of tourism.”

“But also the international environment in which we are going to be working in over the coming couple of years at least is going to be very, very challenging.

“And we, therefore, have to look at most aspects of our economy and ask ourselves the question, what did we know going into this? What have we learnt from it? and where do we take it?”

The tourism question is undoubtedly the biggest.

International tourism is worth $17 billion a year to the New Zealand economy.

It is also highly concentrated in Auckland, Queenstown Lakes and Christchurch.

The Ministry of Business Innovation and Employment estimates that the annual international tourist spend in the Queenstown Lakes district is $1.6 billion out of a regional GDP of just over $3 billion.

The question, then, keeps coming back to how radical will the response need to be.

“We’ve done well in terms of how we have managed our economic policy, but we now sit in an environment where we have to be able to finance a response and recovery.

“At every level, there are challenges.

“But I wouldn’t quite call it a clean sheet of paper.

“That makes it sound like we are abandoning some things that have stood us in pretty good stead over the last few years.

“But I do think we need a significant examination of what kind of economic approaches we need to get ourselves us through this.”

Robertson will be challenged if his answers call for too heavy a hand from the state.

The Executive Director of the NZ Initiative, the German-born, Dr Oliver Hartwich, in a speech to the Covid 19 Epidemic response Committee last Thursday, explained the origins of Germany’s post-war economic “miracle.”

“

The truth is” there was no miracle formula,” he said.

“(former Germany Minister for Economic Affairs) Ludwig Erhard did not micro-manage the economy.

“He did not control individual industries.

“He did not print money to finance his projects.

“Nor did he pay favours to any businesses.”

The NZ Initiative is a small-l liberal economics think tank dedicated to small government and free markets, but nevertheless, there will be many in business here, brought up on the aftermath of Rogernomics, who will sympathise with the case Hartwich is making.

But Robertson has not so far shown any enthusiasm for a highly interventionist role for the state in the economy.

Instead, not surprisingly for a Labour minister, he has focussed on the impact of economic change on peoples’ jobs.

The immediate challenge though ill be coping with what Treasury estimates will be a tripling in current unemployment numbers.

POLITIK has already reported that Cabinet is debating how to cope with this; does it extend the wage subsidy; does it modify the unemployment benefit; maybe even go to a Universal Basic Income.

This is where we have to look at the nature of the way we provide income support,” he said.

“We are dealing with a situation where we’re going to have a period of time where more people are in precarious work; when more people are potentially in periods of time when they come in and out of work.

“And so we do have to look at how we support people through that.

“We’ve got to look at the connection between work and training again “

These were the fundamental themes that Robertson addressed with his Commission on the Future of Work when Labour was in Opposition in 2016.

Central to that report was the idea that the welfare system would promote and support upskilling and training.

Periods of unemployment would be seen as opportunities for upskilling.

“I do think that so much of the core of that is our approach to training and redeployment and reskilling — in one of the phrases in the Future of Work document — is the concept of building wealth from the ground up,” he said.

“And I do think that is where there is a set of cross-cutting issues, training and skills and redeployment are one set.

“Another is what we do to support small businesses and entrepreneurs to set up.

“We have to be looking at what we do in that space.

And we’re looking at particular regions; clearly the Queenstown region, which is dramtically effected will be one.”

Robertson has already established a Tripartite Future of Work Forum involving the Government, the Council of Trade Unions and Business NZ which has been meeting three times a year to address these issues.

But, now, with the financial prop of overseas students likely to be substantially reduced, there will need to be more focus on the whole tertiary education system.

“I believe we need to build a much closer connection between economic development and training,” he said.

“I mean that both at the workplace level but also at the Government level.

“The Tertiary Education Commission has done a good job of managing the flow of resources into tertiary training institutions, but we do need to see the linkages to economic development.”

Sorting this out is a role that only the Government can play. But a more active state may be about to become acceptable.

An editorial in the “Financial Times”, hardly a left-wing journal, on April 4 argued that as a consequence of the Covid-19 crisis, governments would have to accept a more active role in the economy.

“They must see public services as investments rather than liabilities, and look for ways to make labour markets less insecure,” it said.

“Redistribution will again be on the agenda; the privileges of the elderly and wealthy in question.

“Policies until recently considered eccentric, such as basic income and wealth taxes, will have to be in the mix.”

Robertson would pretty much agree with that.

He believes New Zealand has had the success it has had dealing with Covid-19 because it has a strong public health system, public services and adaptable public servants.

“And so the role of the state is very clear.

“I think a second lesson does relate to the way we manage our way through disruptions and crises.

“ Working together and the concept of a just transition is now applied to a number of sectors we weren’t so focused on such as tourism.

“And so I think the state has a significant role.”

Robertson is promising to continue developing these themes through the Budget and in the run-up to the election.

By September, when the country is likely to be seeing the worst of the unemployment starting to hit, a plan that points to the future is likely to be a strong vote-getter.

It is up to National now to present a competing vision.

© 2020, FrontPage Ltd. All rights reserved.