Very tough winter ahead: PM
Govt focus on ‘jobs, jobs, jobs’ but Bridges expects ‘debt, debt, debt’
As New Zealand stares down the barrel of what was yesterday described as the “sharpest and deepest economic slump ever”, the Government has a clear focus: “Jobs, jobs, jobs.”
So says Prime Minister Jacinda Ardern, who warned that today’s Budget would be delivered against the backdrop of the most challenging economic conditions since the Great Depression.
“New Zealand is about to enter a very tough winter.”
And, if the unprecedented nature of today’s Budget wasn’t obvious enough, the Reserve Bank’s near $30 billion expansion of its now $60b money printing scheme should make that clear.
The coming months and years, according to Ardern, will be some of the most challenging this country has faced in a “very, very long time”.
She warned that businesses will close and unemployment will rise — the Reserve Bank yesterday estimated the Covid-19 pandemic could result in 150,000 job losses.
At the same time, top economists are picking the Government’s debt levels will almost triple — reaching as high as $180b in four or five years.
“There is no playbook for the recovery we are about to embark on,” Ardern said.
It is widely expected the Government will announce tens of billions of dollars more in spending today.
It has already earmarked, and spent, roughly $25b on a series of pre-Budget Covid-19 related initiatives.
These include almost $11b on subsidising wages, an extra $4b for district health boards and the health sector, $3b for benefit increases and a winter energy payment boost, and $3b on tax changes to help struggling businesses.
But both Ardern and Finance Minister Grant Robertson say this is just the beginning. A support package for the tourism sector will be unveiled today and there will also be more funding for the media industry.
And after Budget Day there will be even more announcements — the Government’s Covid-19 response is a “rolling maul” of initiatives, Robertson said.
“There will be sector packages, but not all of them will be in the Budget.”
Said Ardern: “Our number one priority is jobs . . . this will be a jobs Budget.” It will have a “relentless focus” on jobs and the economy.
Ardern told the House yesterday the Government’s plan is to “invest in our people”.
“We are creating jobs, jobs, jobs and we are looking after the wellbeing of every New Zealander.”
She said the Budget would be the beginning of a longerterm project by the Government to rebuild New Zealand.
But National Party leader Simon Bridges said he is expecting to see more “debt, debt, debt”. He agreed that now was the time for investment, but said it depends on what the Government is investing in. “What I think we need to see investment in is education, health and saving jobs.” Ardern also confirmed what would not be in the Budget — any cuts to essential services, such as hospital and teaching staff, and members of the police force. “We believe when times are hard, you don’t cut — you invest. The notion that at this time of need we would make cuts to the essential services . . . is not only immoral, it is economically wrong.” There will be no cuts to welfare support, Ardern confirmed. “We will not let our team of 5 million fall when the times get tough; instead we will strengthen the blanket of support the Government can provide.”
As well as a series of new spending initiatives and announcements, Treasury will today lay bare the Government’s books — Robertson said the numbers will be “sobering”.
He has declined to go into detail about what should be expected, but Bagrie Economics chief economist Cameron Bagrie said the numbers will be “horrible”.
Speaking to the epidemic response committee, the former head ANZ economist forecast the Government’s deficit to explode to roughly $30b — compared with a pre-Covid expectation of just a $1b deficit.
Bagrie also reckons Government debt will rise to $180b within four or five years — almost triple the current levels.
At the same time, the economy will take a significant hit as the recession bites.
Bagrie picked that Covid-19 will impact the economy by $3b a month for every month the country is in level 1.
That means even at level 1, the economic hit of Covid-19 will be bigger than that of the global financial crisis, he said.
“[The Government] will have one hell of a fiscal repair job,” he told committee MPs.