The American economy had been riding close to a recession in the months before the terrorist attacks. In the week just before the attacks the US unemployment rate jumped sharply to 4.9% after businesses eliminated more than 100,000 jobs in August alone. Wall St immediately greeted these worse-than-expected jobs figures by wiping billions off the value of company stocks, with the fear that US consumer spending would soon weaken.

But after the unprecedented attacks on the US mainland, and the subsequent mobilisation for war, these fears of an economic recession seem certain to eventuate.

The prospect of a US recession comes at a time when Japan and much of the rest of Asia are already stalling economically … and growth in Europe has slowed to a crawl. This will have a definite impact on the New Zealand economy, despite the generally good economic figures the government has been showing for most of this year. The United States, Japan and Australia are NZ's most lucrative export markets … and sales of NZ products are sure to suffer. Tourism, one of the strongest sectors in our economy, will also be hard hit.

The bankers argue that while the attacks might discourage domestic economic activity in the meantime, the response from governments will see other forms of spending which will help pull the economy out of its recession dive. President Bush has authorised financial assistance for airlines (who were already facing uncertain times before the attacks) and Congress has authorised spending of $40 billion to repair the damage from the attacks and to beef up airport security.

Cullen was careful to point out that he would hold other government spending in check, but he believed that bringing some projects forward in time would not compromise the longer-term financial outlook, and had the advantage of getting work done more cheaply during the downturn. He says the improved infrastructure will prepare the economy to be in a better shape for the next upturn.

Larry Elliot: "Since the 1970s, macro-economic policy has been governed by the idea that inflation is the real threat to prosperity. The theory was that trying to inject demand into economies would lead to higher inflation rather than lower unemployment. […] This no longer has quite the same resonance after what happened last week. Central banks everywhere are now getting the message loud and clear, and have acted in concert to cut interest rates, fearing that the likely impact of the damage to New York and Washington will be a pronounced fall in consumer spending that will lead to a recession, not just in the US but in Europe, Asia and Latin America as well. The priority is international cooperation to boost growth.

"Of course, there may be pressure for business as usual once the crisis is over, but that's hardly the way it feels at present. Take the example of the airlines, now facing catastrophic losses. Airlines are a low-profit business and the market solution to the industry's predicament would be to allow companies to go to the wall, thereby reducing capacity and increasing profitability. George Bush's solution will be a bail-out package of billions of dollars as part of a massive fiscal expansion straight out of the Keynesian textbook..."

Sources _ Seattle Post 8 September 2001 "Loss of jobs rocks US economy" by David Leonhardt; Time 17 September 2001 "Is this your father's recession?" by James Carney and John F. Dickerson; New Zealand Herald 19 September 2001 "World faces war, threat of recession" by Geoff Cumming and agencies; "Shockwave may be economic catharsis" editorial; and "Terrorism to spark rate cuts" by Brian Fallow; New Zealand Herald 20 September 2001 "Spending plan to stave off recession" by Vernon Small; Guardian Weekly 20 September 2001 "Hard knocks ahead on the road to recovery" by Larry Elliot; The Guardian "This crisis is fuelling economic expansion and a Keynesian revival" by Larry Elliot; New Zealand Herald 22 September 2001 "Jobsless figures soar after hits" Reuters; Sunday Star Times 23 September 2001 "World in threat of recession"; Time 24 September 2001 "The Economy: Up from the Ashes" by Daniel Kadlec.

Deputy PM Jim Anderton says that Snap is a response to the difficulty many businesses have in finding affordable and capable short-term employees, and the need students have for meaningful holiday work. Anderton: "Employers will be able to hire students with a related skill base who can quickly grasp what needs to be done and undertake work which really helps a business move ahead."

A new Student Work Start Grant programme has been developed which can help with essential costs faced by students which they cannot afford to pay themselves. The programme is being run in partnership with Student Job Search, which will pilot the programme in Auckland, Hamilton, Gisborne and Invercargill. A special pilot aimed at Maori students will operate in Canterbury.

Sources _ Press Releases NZ Government 16 August 2001 "Government launches students work programme", 17 August 2001 "Auckland to get student matched jobs", 20 August 2001 "snap pilot regions announced".

Mackwell reported that, since 1998, only students who received a student allowance during the year, or whose hardship was caused through "exceptional circumstances" were eligible for the benefit. The policy led to a drop in the number of students getting the benefit from 37,039 in 1998 to 22,163 in 1999. Since then, the numbers gaining the benefit under the "exceptional circumstances" criteria has risen.

Last month, university students handed a petition with more than 7,500 signatures to Alliance MP Liz Gordon, calling for a reinstatement of the Emergency Unemployment Benefit. Dr Gordon has long questioned the equity of a scheme which denies assistance to a 23-year old student who is unemployed, while paying a 23-year old unemployed person a benefit because they chose not to study.

Sources _ The Dominion 6 September 2001 "Emergency dole for students to be reconsidered" by Leah Haines; New Zealand Herald 6 September 2001 "Benefit policy for students to be reviewed" by NZPA

About 3,500 people with disabilities currently participate in sheltered workshops, 70% of which are run by the IHC. These workshops produce goods for sale such as art, craft, woodwork and sewing, or do light engineering or perform services such as gardening, lawnmowing or recycling. Individuals in the workshops get their primary income from invalids or sickness benefits, and are generally paid around $5 to $50 per week for their work (average payment: around $17/wk).

Disabilities Issues Minister Ruth Dyson says that the 1960 Act treats people with disabilities unfairly. Dyson: "Its repeal is a long-awaited change that recognises the human rights of people with disabilities and shows government's commitment to a fully inclusive society."

The changes to the Act will be phased in over the next five years to give sheltered workshops and consumers time to adjust to the new environment. Further information can be found in a government review paper called Pathways to Inclusion that was launched last week.

Source _ Press Release NZ Government "Vocational services to focus on employment"

NZ is short of about 2,000 nurses after a 20% increase in the number heading overseas during the past decade. There are also shortages of young doctors, surgeons, anaethetists, midwives and specialists in areas such as psychiatry, oral health and radiation therapy.

The Health Workforce Advisory Committee has recommended to Health Minister Annette King that graduate doctors be offered loyalty payments totalling up to $12,000 over three years. Nurses and midwifes may also receive about $6,000 in extra payments.

The committee identified student debts as a major part of the health sector's staffing problems. But it considered a loyalty payment scheme as simpler to administer rather than introducing scholarships which bond students to work in NZ.

Source _ Sunday Star Times 16 September 2001 "Cash bid to sway doctors" by Nicholas Mailing

One of the organisers, Annika Streefland of the global recruiter Korn/Kerry International says that one fifth of New Zealand's working population, and maybe a third of its top talent is employed overseas. But she argues that these skills are not necessarily lost to the NZ economy. Streefland: "Don't think of them as a "brain drain" … think of them as an overseas resource."

Sources —New Zealand Herald 24 August 2001 "Brain Gain as NZ draws immigrants" by Simon Collins; New Zealand Herald 19 September 2001 "It's not a brain drain, it's a foreign resource" by Vicki Jayne.

NZ First leader Winston Peter is critical of the new policies, saying they show all the hallmarks of "the same old mess". Peters: "The overwhelming majority of the new immigrants will settle in Auckland, and the rest of the country will be asked to pay for all sorts of infrastructural costs to accommodate them…"

Source _ New Zealand Herald 17 September 2001 "Talented leapfrog to the front of queue"

Louise May: "This says debts should be paid back. If a debtor fails to do so without good reason, then they are acting unjustly. However the principle of commutative justice also acknowledges there is an exception to this rule. If a debtor has no money and no means of getting any, or if repayment of the debt would impoverish the debtor and their dependants, they are under no moral obligation to pay back the debt.

"This principle has some very real implications for the debt of people within our own communities. When applied to the situation of people who receive inadequate income that does not cover even their every day basic living expenses, it becomes clear there are those here in NZ who, like the poorer nations of the world, should be eligible for debt relief or even cancellation of their debts…"

— Paying the Piper can be purchased for $4.50 plus postage from Caritas P.O.Box 12-193 Wellington phone 04-496-1742 fax 04-499-2519 email caritas@caritas.org.nz