Rebuild New Zealand 31 July 2020 Rebuild New Zealand: 31 July 2020 PwC’s special report Rebuild New Zealand: Over time, all aspects of our economy and June 2020 celebrated New Zealand’s success social environment will be impacted by in protecting public health from the global New Zealand’s continued isolation and by the pandemic; but also addressed the longer dramatic, but as yet uncertain, impact of the term challenge of rebuilding our economy. virus on the global economy. We remain optimistic that New Zealand is well placed to see an economic recovery However, if we look to relax border restrictions, that is quicker and stronger than many other then there is an inevitable risk that COVID-19 countries, in part because we have so far will reenter the country. While there is growing prevented the health crisis from hitting our optimism that a vaccine may be available shores. However, there is no doubting the sooner rather than later, careful consideration enormous toll on our economy from the of our options and planning for alternative resulting suspension of business and the scenarios is needed as there are consequences fact that the livelihoods of many have been and risks whichever path we take. drastically affected. We propose that our ongoing response Although it is only seven weeks since the to COVID-19 cannot rely solely on border June 2020 report was published, much has restrictions and the quarantining of all incoming happened, with the nation’s mood having arrivals. A range of other precautions, including cycled through bouts of optimism and using technology to assist both with managing pessimism, depending on what is happening isolation requirements and ongoing rapid both domestically and internationally. There has testing and tracing need to be set up. also been considerable change on the political front, all less than two months out from a In this report, we update our views on general election. several sectors most directly impacted by the economic situation and point to areas that we New Zealand is now in a somewhat paradoxical must focus on as a nation. situation, having successfully contained the spread of COVID-19 domestically, with As part of this, we include stories of Kiwi every prospect of retaining this treasured businesses that have quickly adapted to a status so long as our borders remain closed new operating environment, they shine an and appropriately managed. On the other important light on how different enterprises are hand, continuing international isolation is addressing the very real challenges across a likely to wreak havoc on the economy, not range of fronts in these uncertain times. just for those sectors most directly affected such as tourism and international education. 01 | PwC | Rebuild New Zealand Contents What has happened over the 03 last seven weeks? 07 New Zealand’s paradox The significance of the 09 border debate 13 Case Study: Smiths City 15 Case Study: Auckland Airport Taking precautions 19 beyond the border Balancing priorities in an 21 election year What are the foundations 23 for recovery? Case Study: New Zealand 28 Trade and Enterprise Questions for 33 further debate Case Study: South Seas 35 Healthcare Trust 37 Contacts 31 July 2020 | 02 What has happened over the last seven weeks? Rebuild New Zealand: June 2020 was released just as New Zealand moved to Alert Level 1, when the Prime Minister reported New Zealand no longer had any COVID-19 cases and the nation congratulated itself on a collective response to combating COVID-19. We enjoyed that happy state for approximately compliance, which ensured that the rest of the two further weeks before the reality of living country has remained COVID-19 free. among a global pandemic became apparent, with the arrival of imported COVID-19 cases at On 29 July, the Government introduced our borders. Fortunately, only a trickle of such legislation that will allow charging for managed cases has occurred, all of which appear to have isolation and quarantine facilities. been picked up through the managed isolation (quarantine) now in place. The Bill proposes to only charge New Zealanders who enter temporarily, or who • As at 28 July, over 31,000 returning leave New Zealand, after the regulations come New Zealand citizens and permanent into force. Temporary visa holders will have residents had passed through managed to pay unless they were ordinarily resident in isolation. There have been 83 confirmed New Zealand before the border closure, and cases identified at managed isolation and left before the border closure. The Government quarantine facilities and 21 active cases is looking for agreement from Cabinet to a contained within these facilities. charging structure of $3100 per person in a • In Australia there have been further serious room, $950 for each additional adult and $475 outbreaks of COVID-19, especially in for each additional child sharing the room. Victoria, which has reported more than There will also be mechanisms to allow charges 200 new cases each day for the 10 days to to be waived in full or in part. It is expected that 28 July and now has more than 4,700 active the legislation will be passed before the end of cases. Many of these cases have stemmed the current parliamentary term. from community transmission rather than being linked back to known sources or The Government’s announcement about a clusters. There are also concerning case charging regime for returnees does not come numbers emerging in New South Wales. as a surprise, and is similar in concept and quantum to what has already been introduced Regardless of publicity over eight instances in a number of Australian states. According to of people escaping from managed isolation the Government, the system is intended to in New Zealand, by and large there has been be fair on arrivals and not act as a barrier for 03 | PwC | Rebuild New Zealand people returning to New Zealand, especially A global context for those who might already be experiencing In the United States, while the President financial stress. However, the proposed regime attempts to mount a re-election campaign with its various rules and exemptions will create and hold mass rallies, many US states such as anomalies and could prove controversial. Florida continue to experience increasing case For example, a business owner who has numbers with the pandemic being virtually out to travel overseas to meet a new customer of control in some areas. The US is grappling would be required to pay the charge, whereas with unprecedented levels of budget deficit, someone with permanent residency status who with a shortfall of US$864 billion for the month has been away for ten years and paid no taxes of June alone. At some point the US will have in New Zealand over that time would not be to start living within its means, which poses an required to pay. enormous challenge. US politicians continue Meanwhile, the Government has set aside to be deadlocked on spending plans, while a total of $479 million to cover the costs of the US federal system has proved to be a managed isolation facilities until the end of huge impediment to any coordinated national the year. response plan. Seven weeks at Alert Level 1 has largely seen European countries, including Italy and Spain, domestic life and activities across commercial, that suffered extreme health crises this year sporting and cultural spheres return to normal, with hospitals overrun, and which imposed as evident from the record crowds turning stringent lockdown restrictions, have now out to the relaunched Super Rugby Aotearoa relaxed the rules and are allowing businesses competition. During this time, the nation’s to reopen for the busy summer tourist season. mood has cycled through a range of emotions, Numbers of cases of COVID-19 rose sharply in from burgeoning optimism in mid-June, on the Spain, with nearly 1,000 infections reported in back of expectations that the Trans-Tasman the two days prior to the UK Government swiftly bubble might happen reasonably soon, through removing the country from its list of safe travel to varying degrees of despondency as people destinations on 25 July. British holidaymakers realised that we are in for a long haul when it returning from Spain must now self isolate for comes to the recovery. two weeks upon their return home. The Trans-Tasman bubble currently looks like a In contrast to the US, the EU has initiated a distant prospect given COVID-19 has flared up €750 billion rebuild funding plan, although there in Australia, and any reopening of our borders continues to be debate as to what the individual to the rest of the world is still a long time away. country contributions will be. It is notable that the plan incorporates specific emphasis on There continues to be a pervasive uncertainty environmental factors, which has been absent surrounding key influences on our economic from New Zealand’s response to date. recovery, notably what will be the impact domestically when the Wage Subsidy Scheme Other regions are also at very different stages finishes, the extent of the global recession, in terms of their response to COVID-19. our connections with the rest of the world, The pandemic is wreaking havoc in South especially Australia as our nearest neighbour America and Africa where it is also likely and most significant trading partner, and of that reported case numbers are grossly course, the forthcoming election. understated. On the other hand, China, where the COVID-19 outbreak first occurred, has New Zealand’s domestic situation is in stark recently announced year-on-year economic contrast to most other countries that are still growth, and has a much more positive outlook grappling with widespread COVID-19 outbreaks than most commentators would have picked and community transmission, with varying seven weeks ago.