Covid-19 recovery Budget — biggest in NZ’s history
Govt aims to prevent major economic carnage, but Ardern admits pain is ahead
The Government has unveiled an unprecedented $50 billion rescue and recovery Budget in a bid to save tens of thousands of jobs, as Covid19 continues to wreak havoc on the world’s economy.
It’s the single biggest spending package in New Zealand’s history.
Although Prime Minister Jacinda Ardern is confident her “rebuilding Budget” will prevent major economic carnage in New Zealand, she admits there is still pain ahead.
“It will be significant and it will be painful.”
Government debt is forecast to double to $200b and there will be deficits in the tens of billions of dollars for years to come.
And, according to Treasury, unemployment is expected to be a whisker under 10 per cent by September. But Ardern was at pains to point out the Government was sparing no expense to save as many jobs as possible.
She promised unemployment would fall back to 4.2 per cent in two years — roughly the level it’s at now.
The Budget, as she told the House, was “relentlessly focused on jobs”. In fact, she said it would save almost 140,000 jobs and prevent runaway unemployment, which would have otherwise occurred due to Covid-19.
And at the centre of her Government’s plan is an eight-week extension of the wage-subsidy scheme, first announced in March.
The Government poured an additional $3.2b into the scheme yesterday, taking the fund’s total to $14b.
From June 10, businesses which have suffered, or are expecting to suffer, a 50 per cent loss of revenue will be eligible for the scheme’s extension.
And there are a number of other multibillion-dollar job creation and saving schemes included in the Budget, as well as a huge push for training and retraining.
There was $220m to bolster the free lunches in schools programme and an additional $1.2b for railways.
And the Government revealed it would borrow $5b in the next four to five years to build 8000 state and transitional houses in partnership with housing providers.
But, given Covid-19-related spending was the Government’s priority, some previously announced policies were put on ice.
For example, the expansion of the fees-free tertiary education scheme appears to have been shelved — when asked about the future of the policy Ardern refused to be drawn.
Big-ticket items of the Budget include:
● A $3.2b extension of the wagesubsidy scheme
● A $1.2b railway package
● A $3b infrastructure investment package
● A $1.6b trades and training scheme
● A $220m expansion of the school lunches initiative
● A $400m targeted tourism support fund
● A $830m disability support package
Finance Minister Grant Robertson described yesterday’s Budget as “the most significant financial commitment by a New Zealand Government in modern history”.
However, National Party leader Simon Bridges was critical of a number of areas within the Budget, notably the expected increase in Government debt.
Treasury forecasts show that by 2024 the Government would have borrowed close to $200b — up from the $90b already owed.
That figure was $65b just two months ago.
This is, according to Bridges, a “tsunami of debt”.
But Ardern said Covid-19 was the “rainy day” the Government had been saving for.
“To say that, a rainy day demands of us that we shelter and protect New Zealand to weather the storm,” she said.
“Rather than argue about who gets to hold the umbrella, I hope the Opposition steps away from business as usual, and votes for this Budget and the jobs it will create.”
Although National did not move the traditional “no confidence” vote in the Budget, Bridges confirmed his party would vote against it.
He was also worried about the upcoming Government deficits — averaging $28b a year over the next two years — reaching as high as $30b next year.
The Government is not expected to return to surplus until at least 2028.
“I’m disappointed because I don’t see a plan for jobs and growth,” he said in the House.
He pointed out that there was a lack of detail in some of the announcements, such as the $400m earmarked for the tourism sector.
“Spending money is the easy part but Grant Robertson doesn’t even know today how he would spend it all. Much is unallocated and it all needs to be paid back.”
The $50b is over four years — $16b announced yesterday and $14b announced before the Budget.
The remaining $20b is yet to be allocated.
The Government has signalled that a funding package for arts and sports will be unveiled in the coming days and more money for New Zealand’s media sector will also be announced soon.
But a number of stakeholders have already begun lobbying the Government to use that yet-to-be-announced $20b to save their sectors.
The Council of Trade Unions, for example, said that funding should be used to create more environmental jobs.