All eyes on the man with the money
Tens of thousands of Kiwis are facing a stark future after losing their jobs, or business, to coronavirus. They are desperate for Grant Robertson’s ‘recovery’ Budget this week to throw them a lifeline; the alternative, say some, could even mean losing their home. By Josephine Franks, Amy Ridout and Rahul Bhattarai.
Mark Tinetti hasn’t been out of work since he was 18. But when the 47-year-old applied for a supermarket job during lockdown he was one of 480 applicants. He didn’t hear back.
Until April, Tinetti managed a fishing shop in Hamilton, bringing home $60,000 a year. But with the country in lockdown he was let go, with two weeks’ wages and his remaining holiday pay – no wage subsidy.
Then he realised he wasn’t eligible for any other benefits either. His partner, a teacher, earns about $70,000 a year which means he can’t apply for jobseekers’ allowance; $36,504 is the cut-off point.
People like him have been forgotten, he said: they’re the hidden unemployed. While his family’s household income has been slashed in half, their outgoings have stayed the same, and having a 12-year-old daughter means there are school expenses to think about too.
‘‘Everyone’s talking about the wage subsidy, and grants for businesses, there’s been nothing said about people in my situation.
‘‘I don’t get anything. That’s it, you’ve lost your wages, good luck, hope you can live on what your family earns.’’
The family are now sticking to a strict budget. ‘‘We’ve got $100 a week for groceries. There’s no extras, there’s no more beers, I can’t go fishing which I love because we can’t afford the fuel.
‘‘It’s just week-to-week living, just like a lot of people are.’’
Tinetti is far from alone; on worst-case scenarios, New Zealand is headed for Depression-era levels of unemployment as the ripples from coronavirus spread.
More than 33,000 Kiwis have applied for the unemployment benefit since New Zealand closed its borders and the Government ordered households to shelter in place to stop coronavirus overwhelming our hospitals.
But those numbers could be the tip of the iceberg; like Tinetti, many more won’t qualify for a benefit so won’t be reflected in the official statistics, while more than a million workers – 40 per cent of the workforce – are currently being supported with emergency wage subsidies, which are due to come off in just weeks.
Once those subsidies are removed, tens of thousands of jobs more could go too.
Election-year Budgets typically deliver ‘‘hip pocket’’ promises – like tax cuts, or increases to Working for Families, and the accommodation supplement. But ‘‘hip pocket’’ measures have taken on more significance at a time when jobs and businesses are on the line.
This week’s Budget is being pitched as the mother of all ‘‘recovery’’ Budgets.
But many Kiwis – Tinetti among them – will be hoping for something that looks more like a lifeline, one that saves their jobs, their incomes, even their homes.
‘‘The only thing that would help would be lowering the threshold for the approval of benefits,’’ he says.
He will consider any job to get back into work; he is even looking at advertising for lawnmowing work.
If that doesn’t work, he’ll try selling some of his possessions: ‘‘Anything to bring some dollars back into the house.’’
‘‘And then it becomes, how long can we hold on to this house?’’
Writing in today’s Sunday StarTimes, Bryce Wilkinson, from think tank The New Zealand Institute, says no one has questioned the merits of the massive $12 billion in spending on government wage subsidies and business support since the lockdown.
But the implications for public debt and future tax burdens would be significant.
It is a concern echoed by former National finance minister Bill Birch, the architect of the Muldoon-era ‘‘Think Big’’ projects born out of the 1970s oil crisis.
He said the Government had acted swiftly, as it should, to protect its citizens and put in place systems to ensure the virus didn’t create huge damage.
‘‘But quite frankly I worry about other aspects of what they are doing today in terms of their fiscal management.
‘‘A very important role of government and one of the reasons we have government is to ensure the overall economy is managed in an astute way; that creates the wealth and conditions that people can become educated, find jobs and work and generally enjoy the environment they’re been bought in. A key element of that is fiscal management and I’ve been quite disturbed by the willingness of the Government to actually release money into the economy without satisfying themselves that it’s a cost effective use of the resources of the state.
‘‘The result is going to have a huge increase in our public debt which needs to be serviced, in increased taxes and fiscal
management. There’s no escaping that. It’s a legacy that really does worry me.’’
Robertson acknowledged earlier this week the scheme wasn’t perfect: ‘‘But I stand by our approach. Unlike many countries, we got money into the pockets of Kiwis right away, kept them in work and supported the businesses who urgently needed it. I know that we saved jobs by this action.’’
The next stage of the recovery will be opening up more of the economy when New Zealand moves to level two. The earliest that can happen is Wednesday and it seems likely the Government will want to stick to that timetable.
Any delay, and the pain that would cause many businesses already on the brink, would be a huge distraction from the Budget.
A move to level two will see the vast majority of businesses reopen and people back at work.
But it still won’t be business as usual. The Reserve Bank estimates economic activity will be suppressed by almost 9 per cent due to social distancing requirements, the loss of international tourism, and the hit to spending on accommodation and the food industry.
During level 4 lockdown, GDP slumped by around 37 per cent, equating to about $10 billion of lost production.
Robertson has said the Budget will start looking ahead not just to the recovery, but to rebuilding.
Economists say with so many unemployed, the priority should be training and education: Tony Alexander said the failure of the 1984 to 1992 reforms was leaving people who lost their jobs to fend for themselves.
‘‘That can’t be allowed to happen again and it is far better that resources are directed at assisting affected people to regain useful productive employment than throwing money at all and sundry hoping for a boost in spending which will mainly benefit factories overseas.’’
But Robertson’s more immediate priorities this week will be helping businesses get back on their feet.
He says support will naturally become more targeted, ‘‘as some industries and firms are able to survive and recover on the back of broader stimulus measures’’.
Andrew Schwass is another one who plans to be ‘‘in front of the box’’ when Robertson delivers the Budget on Thursday. The Kiwi Journeys director hopes the Budget will provide relief for his Nelson company, and the wider tourism industry.
Border closures and then lockdown spelled an abrupt end to Kiwi Journeys’ best season, Schwass said.
‘‘We lost two months of revenue that would have tided us over winter.’’
The wage subsidy had allowed him to keep his seven full-time staff, and a threemonth rent holiday from Nelson City Council meant he saved $5000 a month on his central Nelson site.
But with the subsidy and rent holiday coming to an end, the future of his business, along with others relying on tourist spending, looks precarious.
‘‘A lot of people are back to work, but our businesses are just dead. We’ve still got expenses even though we have had to shut up shop.’’
Schwass hoped there would be provision within the Budget that would allow him to pay wages, rent, and other fixed costs.
Without this help, he faced the ‘‘horrible’’ prospect of making staff redundant.
The past few weeks had been stressful, Schwass said.
‘‘I’ve had moments of being anxious, not knowing means you can’t plan.’’
The father of two young children has avoided contemplating his business folding altogether.
‘‘We have got a strong brand, and we are pretty lucky to be in Nelson, where cycling is quite popular. I’m trying not to think of that scenario.’’
Dan Gillett, who owns three small businesses, said it was too early to gauge the kind of help he should expect from the Government before opening his doors to customers.
‘‘We need to get trading first to assess the impact [of Covid-19],’’ he said.
Gillett owns two restaurants in Marlborough and Auckland, and a wine retail shop in Wellington, employing 18 staff across the three locations.
On May 1, the Government announced the ‘‘small business cashflow loan scheme’’ which would provide assistance of up to $100,000 to firms employing 50 or fewer fullequivalent employees.
This is a one-year interest-free loan designed to help small businesses that were struggling due to the Covid-19 pandemic, and applications are open from May 12.
While it was good to know that he could apply for government support, he wasn’t certain if he would need it yet, Gillett said.
‘‘The best answer possible for every business in all of this situation is that people continue to support businesses . . . fundamentally, that’s going to be the difference between surviving and not for every business, everyone needs to group and hold tight,’’ he said.
Auckland’s TAMA eatery & bar coowner Nitesh Rai said he was rather nervous about the future of his business because even though there had been some support from the Government, he still doesn’t know what to expect in level two.
‘‘We are very grateful with the Government’s help so far, but we are also eagerly waiting for the Government’s Budget announcement to see if they have planned anything more for us in these times of uncertainty,’’ he said.
‘‘It’s too soon to tell what kind of further help we need from the Government without starting the business,’’ he said.
During level three, Rai had been taking takeaway orders, but his business had mostly relied previously on diners coming in, he said.
‘‘With social distancing rules people might be too cautious to come into the restaurant, and we had always been more focused to cater for our diners than doing deliveries,’’ he said.
During level 2, while complying with social distancing rules, Rai’s restaurant could only host a maximum of 20 customers compared to the normal 50.
‘‘Takeaway orders help, but lack of enough deliveries is where the business struggles,’’ he said.
‘‘We’ve got $100 a week for groceries. There’s no extras . . . It’s just week-to-week living, just like a lot of people . . . It becomes, how long can we hold on to this house?’’ Mark Tinetti