Global shocks and taking stock
How do we manage big global shocks? How do we prepare for the next one? Today I attended a guest lecture at The Treasury – New Zealand. The speaker was Dr Allan Bollard, former Secretary of NZ Treasury & Governor Reserve Bank of New Zealand and currently Professor at Victoria University of Wellington.
Dr Bollard shared his personal perspectives on three big global shocks: 1 the “9/11” attacks in 2001 – (11 Sep USA, 12 Sep NZ); 2 the 2007-08 Global Financial Crisis; 3 the 2020-21 Covid-19 Pandemic. Global shocks disrupt us and bring long term change. We need to take stock of our vulnerabilities to ensure we can respond. Dr Bollard described his view of what happened and how people and markets responded.
Given the speaker and the venue, the focus was on the economic shocks from these events and the political and economic responses. In each case, there was no pre-prepared plan here in NZ for an event of such scale.
The 2001 attacks triggered the collapse of Ansett Australia (recently purchased by Air NZ), a NZ$1Billion bailout of Air NZ. The GFC triggered NZ’s biggest ever OCR cuts in early 2009 after Lehman Brothers collapsed. NZ’s Covid response included a NZ$50Billion envelope to inject into the economy.
Key lessons from the session include:
– at a national level, being in an economic position to respond to a crisis may matter more than having a specific plan;
– the economic responses to a crisis leave a long tail to deal with later;
– we are unlikely to predict the next big shock but we can still learn lessons from previous ones
My own personal reflection from attending this event is that it is very easy to be complacent about the current state of the economy or even one’s own business. Imagining scenarios that would seriously stress-test a business or a nation can be a useful way of identifying vulnerabilities.
The challenge is to then do useful things to reduce those vulnerabilities and improve resilience. Diversification, innovation and increased efficiency all increase the breathing space to handle a crisis. If that sounds like something you would like to discuss, please get in touch.
Phil Guerin, Consultant/Director, Hague Consulting Ltd. © Hague Consulting Ltd 2024. If you like this content, subscribe to our blog – it’s free!
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