Wage subsidies, an instant injection of health funding, and a benefits increase are among the measures in the Government’s Covid-19 response package – but Finance Minister Grant Robertson says this is just the start.
The Government has unveiled a $12.1 billion coronavirus response package – labelled New Zealand’s most significant economic plan in peacetime – as it seeks to prepare for the worst of the pandemic sweeping the globe.
A $500m boost for health, $8.7b in business and job support, and $2.8b for income support and consumer spending stimulus comprise the package, which adds up to 4 percent of New Zealand’s GDP.
Announcing the details of the economic package, Finance Minister Grant Robertson said the health and wellbeing of New Zealanders was the Government’s first priority, and it had to act now to soften the economic shock from Covid-19.
Robertson said the package was not a one-off response but just the beginning of a wider work programme to lead New Zealand through the pandemic.
“As we go through this crisis towards economic recovery, the Government will be constantly monitoring the situation and adjusting its response.
“As with every action we have taken, we will be constantly reviewing every measure to ensure it is getting to the people and businesses that need it the most.”
Nearly half of the dedicated $500m health fund for Covid-19 – $235m – will be immediately used for public health measures, primary care and the Healthline phone service.
The business support package includes $5.1b in wage subsidies until June 2020, $2.8b in tax changes, and $600m for aviation support – although the latter does not include Air New Zealand, which is involved in separate talks with the Government as a shareholder.
Among $2.8b in initial income support and stimulus measures are a permanent $25 increase to main benefits across the board from April 1, along with a doubling of the Winter Energy Payment for 2020 and removing the hours test from the in-work tax credit.
“Any measures the Government takes must be timely, fiscally sustainable, targeted to those who need it, and proportionate to the level of economic shock.”
Robertson said the Government was actively discussing the issue of working capital support for small and medium businesses, along with tailor-made support for larger organisations, and was being guided by four principles in its response.
“Any measures the Government takes must be timely, fiscally sustainable, targeted to those who need it, and proportionate to the level of economic shock.”
New Zealand was being rocked by an “unprecedented global situation” and almost certain to go into recession, he said, with the Government “taking tough decisive action to implement measures that give us a fighting chance of mitigating the worst here”.
On its own, the Covid-19 package was larger than the operating spending for all three of the Government’s Budgets this term.
Asked why the Government had moved away from its plan to provide targeted economic support to sectors that were particularly affected, Robertson said the deteriorating global outlook for the pandemic had led to a change of approach.
“Targeting any one sector [would be] at best a short-term exercise and at worst a fruitless one.”
Increasing benefits would provide greater support to potentially higher numbers of Kiwis who found themselves out of work, and would have a stimulatory economic effect, while the Winter Energy Payment increase would provide a boost to older Kiwis who were particularly susceptible to the worst effects of Covid-19.
Robertson said the Government currently had no plans to extend the wage subsidy scheme past June, although it was aware that matters were evolving on a daily basis.
It was currently looking at what Provincial Growth Fund projects and initiatives from its infrastructure package could be brought forward to provide a stimulatory effect.
Read more of Newsroom’s Covid-19 coverage here.
