When Level 4 was extended by five days Employment Minister Willie Jackson said that another week at Level 4 won’t “hurt or destroy anyone” which showed his out of touch some Ministers were or are.
One of my readers suggested to me that I develop a Covid Cost Counter to show people in real time what the cost to the economy is of being in Level 4 or Level 3, to complement my current counters showing the number of Kiwibuild houses and trees the Government should have built or planted by now.
I consulted half a dozen economists on the best way to calculate this, and not surprisingly got a wide range of opinions. A key point they stressed is that the cost to the economy in Level 4 or 3 is not just because of the decision to be in that level, There will be some cost regardless of government decisions as people change their behaviour regardless.
So the counter shouldn’t be seen as measuring the cost of the decision by the Government. But what is can be seen as is the cost to the economy is huge and growing every day we continue, and that there is a very real trade off.
So what is the cost of Level 4 and Level 3? Treasury said Level 4 sees a 40% reduction in GDP or output and Level 3 a 25% reduction/
So an simple calculation is
- Annual GDP $320 billion
- 40% is $128 billion
- That is $350 million per day
- That is $14.6 million per hour
- That is $243,000 per minute
- That is $4,058 per second
For Level 3 it is $2,536 per second.
So on the right hand side you can now see a Covid cost counter. It shows the costs in thousands of dollars as it can’t move fast enough to show $2,536 clicks every second.
So far our economy has lost an estimated $11.8 billion and that is increasing by $219 million a day. Per household that is $6,700 per household and increasing at $125 a day.
Again this is now just because of the Level 4 and 3 restrictions. Some of this was inevitable the moment we started social distancing. But it is a constant reminder of the huge cost households and businesses will incur the longer we continue with the restrictions.