As we celebrate the potential for haircuts and a meal out with friends from Thursday, we are also about to get a brutal reminder that the impact of the Covid-19 pandemic will last a long time, as Finance Minister Grant Robertson delivers what is se to be one of the most sombre and unorthodox budgets in living memory.

Thursday is set to be an emotionally complex day. Because while we move down the alert levels measuring the risk to our health, the economic alert levels are set to go higher. We are in week nine of what was promised as a 12 week wage subsidy, that has acted like a freeze-ray on large parts of the economy.

In many ways our economic life has been on ice. Around a third of all economic activity was shut down. But while consumers will enjoy the thaw, business owners and workers will begin to feel the pain.

Businesses have been able to stand still with staff on subsidised wages, while we all stayed home and saved lives. Everything was put on hold, while the government put its finger in the dyke. While Budget 2020 may well offer an extension to the wage subsidy and tax credits in some form - and will certainly provide economic support targeted to some of the worst hit sectors - at some point the water will flow through that hole. And then will come a deluge.

Last year the Labour-led government produced a “wellbeing budget”. This year wellbeing takes on a whole new meaning. It’s about hanging on.

The government is hoping to minimise and manage that flow of business collapses, job losses and economic collapse. But in some shape or form, it will come. The only question is: how bad is bad?

A recent Westpac Economic Overview report suggests unemployment will hit 9.5 percent and our debt to GDP ratio sill more than double to 50 percent.

“GDP is set to decline by 17% through the first half of this year. In comparison, during the Global Financial Crisis (GFC) economic activity fell by a total of 2.7%, with that drop spread over a period of 18 months.”

Will it be like the the fallout from the 1987 stockmarket crash, as the Herald’s Liam Dann suggests?

“New Zealand dipped in and out of recession for five years. Unemployment rose from 4.2 per cent, peaking in 1992 at 10.7 per cent.”

On this site, Brian Easton has made comparisons to the 1966 wool price shock:

Together, international tourism and educational services generate about a sixth of our export revenue. In 1966 the price of wool collapsed, also taking with it about a sixth of our foreign exchange earnings. It took over a decade to adjust and when we got back to ‘normal’, the long-run track of the economy was about 15 percent lower than the previous one.

Or will it be worse, with echoes of the Great Depression?

Ministry for Social Development documents leaked to RNZ last week show it is preparing for an extra 300,000 benefit applications in the coming weeks, primarily due to job losses from Covid-19. When asked about the documents, MSD said it was instead preparing for 200,000 applications.

Even if we believe the official response rather than the figure seen in the leaked documents, it suggests trouble of a greater magnitude. An extra 200,000 New Zealanders on unemployment benefits would mean nearly another eight percent unemployment, taking the pre-pandemic figure from four to 12 percent. If the documents are right and we see 300,000 applications, we’re talking 15-16% unemployment.

Tourism businesses yesterday were talking of getting back to work - at 20 percent of what they were pre-Covid.

So let’s not delude ourselves with our haircuts and happy meals. The economic freeze ray we’ve been living with cannot last forever. And when we unfreeze, we’ll see a more accurate picture of the economic harm the virus is causing.

The pain from Covid-19 has only just begun. There are more holes set to appear in the temporary dyke the government has built to stop the economy collapsing. The job of this week’s budget is to find new fingers to put in those holes. Not just for for a few weeks, but for months to come.

Robertson is no ‘tax and spend’ leftie, but it will be interesting to see how he balances the desires of his political base with the needs of the economy. Crisis is opportunity, so there is a chance for him to make his mark in the pantheon of Labour Party financial managers. And party tradition and legacy is also something that matters to him. But Robertson hasn’t spent years building his financial cred to blow it when pressure is at its height. So those on the left will likely have to reconcile to the fact that the sort of progressive government spending they were hoping for at the start of the year will be on ice. The priority for the government’s balance sheet now is - to borrow a well worn line from Bill English - not the nice-to-haves but the necessities.

This will be a survival budget; it needs to recognise that the economic alert levels are going up. Because only as the freeze ray wears off over the next few weeks will we see how dire our economic future really is and how much harm will be done not by the virus itself, but by its economic fallout.