Business is reeling after the Government’s shock travel ban announcement over the weekend, and hoping a government rescue package will help them avoid painful decisions to shed staff
Businesses all around the country are holding crisis meetings today about how they’re going to cut costs in the wake of a major travel ban that has slashed the number of tourists coming to New Zealand.
Tourism Industry Aotearoa (TIA) chief executive Chris Roberts said he was aware of several such meetings going on around the country, and had one request: wait.
“Wait for the Government announcement tomorrow.”
Over the space of a week, the Government has gone from a modest recovery package in the millions to one likely in the billions. Prime Minister Jacinda Ardern has promised it will be “the most significant package that I will announce while I am Prime Minister”.
The change of tack is thanks to a likely downturn in economic activity following far-reaching public health measures, including a 14-day self-isolation period on all visitors entering the country outside of the Pacific Islands.
The measures aim to slow the spread of Covid-19 and ensure the number of cases that need to be treated at any one time never exceed the resources available to treat them.
However, the cost to industries like tourism will be huge, with tourism demand having effectively been wound down to zero overnight.
Roberts said 393,000 people were employed in jobs dependent on tourism, and the consequences for the country would be serious if even 5 percent of those jobs were lost.
“Social distancing doesn’t really fit with travel and going to cafes or restaurants.”
The crisis was not like others in the industry’s history, he said. During other downturns, the industry could always adapt by refocusing on another foreign market or even the domestic market.
This time, even the domestic market would suffer on the back of the behaviour changes needed to halt or slow the spread of the virus, Roberts said.
Several events have already been cancelled or postponed, including the Pasifika Festival in Auckland and Homegrown in Wellington.
“Social distancing doesn’t really fit with travel and going to cafes or restaurants,” Roberts said.
In the wake of the announcement, several lobby groups have said the Government should abandon its plans in a number of areas due to the crisis.
Federated Farmers president Katie Milne said the Government should follow the Reserve Bank’s lead and defer several regulations in response to Covid-19.
The RBNZ announced Monday morning it would defer new capital requirements it was set to impose on banks. Milne proposed the Government follow suit in changing its plans for freshwater management, climate change, biodiversity, minimum wage, immigration, the ETS and others.
The National Party and other business groups, including the TIA, have also called for a minimum wage increase scheduled for April to be delayed.
Roberts said a package to keep tourism businesses afloat after such a major shock would have to be measured in the billions, and the focus of any plan must remain on keeping people employed so the industry could take on tourists once the market returned.
‘Keep it simple’ and fast
Roberts wanted an across-the-board assistance package with simple criteria that provided a minimum subsidy of $500 per worker, similar to the one put in place after the Kaikōura earthquake.
Eligibility should not be limited to a particular region or industry, he said.
Instead, any business that could demonstrate it had suffered a 40 percent or similar reduction in turnover should be eligible.
A simple scheme along those lines was also supported by others last week before more recent developments.
Roberts said a system with simple criteria like that could see money flow out to cash-strapped businesses in a matter of weeks.
However, a more complicated scheme that required business advisors to sit down with individual businesses to determine eligibility could take two or three months to set up, he said.
Kirk Hope, chief executive of BusinessNZ, said the Government also needed to provide more certainty around employee leave. Namely, whether leave from work to self-isolate for Covid-19 would come on top of existing employee entitlements or if the Government would subsidise an employee’s wages while on leave.
Hope said the measures announced on Tuesday should be divided into a short-term package for businesses and a longer-term macroeconomic package for the economy.
“If we can get the disease under control here … and our trading partners do that, as they’ve done thus far in China, we may need capacity in a relatively short period of time to respond to a pickup in demand,” Hope said.
“This is really about ensuring that those businesses, while they might not be able to see the light at the end of the tunnel for the next fortnight, at least may be able to see that there is some prospect of business in the next quarter or the next six months,” he said.