$12.1b stimulus widely welcomed
Scale of spending as NZ copes with virus described as bold, strong and suitably aggressive but more is to come
The Government’s unprecedented $12.1 billion Covid-19 spending package — “the most significant peace-time economic plan in modern New Zealand history” — has been almost universally welcomed.
“In unprecedented times, you make unprecedented decisions,” Prime Minister Jacinda Ardern said in the House yesterday.
And this is just the beginning. The rest of the package will be unveiled during May’s “recovery” Budget.
The scale of the spending has been described as bold, strong and “suitably aggressive” and comes as Finance Minister Grant Robertson admits that a recession in New Zealand “is almost certain”.
The package includes:
● $5.1b in wage subsidies for Covid-19 affected businesses;
● $2.8b income support package, increased benefits and the doubling of the winter energy payment;
● $2.8b in business tax changes to free up cashflow;
● An initial $600 million aviation support package
● An initial $500m for health;
● $126m in Covid-19 leave and self-isolation support;
● $100m for redeployment. Almost half of the cash will be spent on a wage-subsidy package for all Covid-19-affected businesses.
Eligible full-time workers will get $585 a week, paid in a lump sum of just over $7000 covering 12 weeks.
Part-time workers, people working fewer than 20 hours a week, would receive $350 a week.
Businesses which have suffered, or are projected to suffer, a 30 per cent fall in revenue compared with any months between January and June the previous year will be eligible.
That is as long as they have taken steps to mitigate Covid-19’s impact and promise to pay affected employees at least 80 per cent of their income over the 12-month period.
Employers can already apply for the subsidy and Ardern said money could be with them in as soon as five or six days. The most any one employer can receive is $150,000.
The Government is also spending $2.8b on raising benefits by $25 a week, starting April 1, as well as doubling the winter energy payment.
That’s a total of $8.7b for businesses and jobs.
“The Government is pulling out all the stops to protect the health of New Zealanders and the health of our economy,” Ardern said.
A Covid-19 sick-leave scheme will be available for eight weeks at a cost of $126.5m. Some 27,000 workers every two weeks are expected to take advantage of this scheme.
It comes as the number of people in New Zealand with Covid-19 yesterday jumped to 12 — a four-person increase on Monday.
There are now more than 180,000 confirmed cases around the world and more than 7000 deaths.
As well as the billions being spent on wage subsidies, an extra $500m has been poured into health.
This, says Ardern, will minimise job losses and keep the health sector from being overwhelmed.
It will also boost spending on extra virus testing, more medicines, face masks, extra intensive-care capacity and equipment at hospitals, and more money for GPs.
Robertson was at pains to point out how sizeable the package was.
It represents roughly 4 per cent of overall GDP and is comparatively larger than similar packages rolled out by the Governments of Australia, Britain and the United States.
But it is at big cost to the Government’s books.
Robertson confirmed the Government will go into deficit for the foreseeable future and its borrowing will need to increase by billions of dollars.
Its self-imposed Budget Responsibly Rules will be broken but, as Ardern pointed out in the House, they were made to be broken for situations such as these.
“We have always been prepared for the fact that a rainy day could befall us — that rainy day is here.”
Speaking to Newstalk ZB last night, Ardern said although the spending would help save some jobs, many would still be lost.
She said it would be worse than the global financial crisis, where unemployment rose to 6.7 per cent — 2.7 per cent more than current levels.
National Party leader Simon Bridges slammed the package and said it focused on “ideologically” driven benefit increases over helping medium-sized Kiwi businesses.
“This package has confused priorities that do not deal, non-ideologically, with the issues we face in New Zealand right now.”
Although economists have welcomed the Government’s package, some say more spending is needed.
“The New Zealand Government’s Covid-19 support package is suitably aggressive and will cushion the blow to parts of the economy, but it is only the start of what is required,” said Westpac chief economist Dominick Stephens.
ANZ chief economist Sharon Zollner said: “This is a bold package, with more to come, in response to a shock that is expected to be greater than the global financial crisis.” Unions were also impressed. CTU president Richard Wagstaff said the package provided an immediate boost to get workers through these challenging times.