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Alert Level 3 explained – Expert Reaction

The Prime Minister has given more details on what life in New Zealand will look like under Alert Level 3 – ahead of Monday’s Cabinet decision about when to end lockdown.

The SMC asked experts to comment on the economic and psychological impact of these new guidelines.

Professor Stephen Knowles, Department of Economics, University of Otago, comments:

“All New Zealanders are hoping the number of new Covid-19 cases continues to fall so the country can move to Level Three next week. Businesses are desperate to reopen and everyone hopes the economy will start to return to normal as we move down the levels. However, for the economy to return to anything near normal requires more than businesses reopening; it also requires consumer spending returning to somewhere near pre-crisis levels.

“This is unlikely to happen, at least in the short term. People who have lost their jobs, taken a 20% pay cut, or are living in fear of losing their job are not going to have as much money to spend as they did a few weeks ago. Many businesses will find there simply isn’t the demand for their products there was a month ago.

“This is why the Government’s economic response has focused not just on spending money to keep businesses afloat (e.g. the wage subsidy), but attempting to keep consumer spending buoyant. Government spending designed to stimulate consumer spending includes increasing welfare payments and pushing ahead with the increase to the minimum wage even though the latter increases costs for businesses, making it harder for them to stay afloat (perhaps the Government could pay the minimum wage increase for businesses in the short-term). This spending inevitably means a huge spike in government debt, but spending both to keep businesses open, and consumers spending, is what is needed to avoid unemployment reaching the worst-case scenarios in the Treasury’s forecasts.”

No conflict of interest.

Dr Dougal Sutherland, Clinical Psychologist, Victoria University of Wellington and Umbrella Health, comments:

“The Government’s announcement today about Level 3 restrictions will no doubt bring some sense of relief to the nation. Reducing the restrictions on people’s movements, allowing some small gatherings for important events, and have some flexibility in our bubbles will allow more of the social connection that many of us have been craving. Being able to get together again will bring a lift to our spirits as will, for some at least, the opportunity to return to work. Easing of stress due to financial hardship is an obvious benefit to the wellbeing of those able to restart their businesses.

“But there may be unexpected negative psychological effects. There is the potential that the changes will lead to an increase in frustration, stress, and ‘narking’, particularly if the limits of the different levels are not clearly understood. Although Level 4 restrictions were tight the limits were, for the most part, relatively clear.

“But with increased flexibility comes increased uncertainty and potentially a sense of feeling unjustly treated. Households may have some kids at school and others not. They may have some adults at work and others not. Less certainty can promote more anxiety and more potential for people looking for gaps or loopholes in the rules particularly as businesses rush to meet requirements that they can operate safely. Seeing others being treated differently can lead to feelings of anger, resentment, and unfairness. The Government has noted that they are still refining the limits of the different Levels. The sooner this can be done the more certainty it will give all of us.

“Loosening restrictions on people’s movements could see a rapid increase in people seeking psychological and mental health support. There are signs that during lock-down people are turning to phone-based psychological support services instead of face-to-face meetings. We know that major crises like this can trigger episodes of anxiety and depression, especially in those with a history of these difficulties. There is a risk that as we emerge from lockdown a wave of help-seeking may overwhelm mental health services. There has already been a ‘call-to-arms’ of mental health professions to support DHB services and the national 1737 helpline.

“We will all need to take care to guard our minds against the optimism bias of ‘it’s OK now and won’t happen to me’ as we move out of Level 4. Covid-19 doesn’t suddenly go away just because the Government changes an alert level. This battle won’t be over until we have fully contained the virus and a vaccination has been found.”

No conflict of interest.