Fiscal responsibility matters. Being careful guardians of the public purse during good times provides flexibility for dealing with nightmare scenarios. One such scenario is now unfolding, so it is worth going through the basic principles that guide us through.

Gearing up for this pandemic will be expensive. Without greater capacity in our hospitals to deal with a surge of new virus cases, people will be left to die untreated for want of beds, ventilators, oxygen, heart-lung machines, or and the staff capable of operating those machines. Quickly getting more capacity in place matters.

The economic consequences of the pandemic will also be severe, even if New Zealand is somehow able to avoid the pandemic taking a serious foothold. A brief and sharp recession seems a best-case.

Dealing with all this will be expensive for the Government, businesses and households alike. So, how should the Government fund its part of the burden?

Start by separating pandemic policy from everything else. If you have a wish-list of tax or spending initiatives from before this mess, this crisis is not the time for pushing those barrows.

The Government should spend some effort identifying programmes it can easily put on hiatus to free up resources for the Covid-19 response. This does not mean it should slash spending on a badly timed push for fiscal austerity. Rather, it means the best mix of government spending programmes has changed substantially so spending money on international tourism promotion, for example, no longer makes much sense. That money can be put to better use.

Fiscal discipline should be maintained on everything unrelated to Covid-19 and its consequences. If the Government does things like hike benefits permanently, it needs to be sure that that is within the envelope for long-term fiscal responsibility.

The substantial, but temporary, spending increases necessary for Covid-19 should be funded primarily through debt – and as much as it takes to get the job done. The health system should allocate as much as is necessary on anything passing cost-benefit assessment.

But this will require discipline over the normal spending items in the budget. Paying off debt we now must take on is much harder if the Government locks in new permanent spending which is hard to reverse.

The ability to restore headroom matters a lot – unless earthquakes and other natural disasters are also on self-isolation for the next few years.