Robertson indicates ‘helicopter money’ cash payouts to all are being considered as Ngai Tahu shuts 12 tourism businesses and lays off 300

Free money?: In a move that might be a first in New Zealand, the Government is seriously considering giving everyone, kids included, a one-off cash payment to boost spending and pump some much needed funding into the retail sector. The move follows a similar approach taken by the U.S. and several other countries as a way of stimulating moribund economies.

Helicopters whirring: Finance Minister Grant Robertson has strongly hinted at the plan which, not surprisingly, has been universally welcomed by economists and retail business leaders. See more here via TVNZ.

Quote du jour: “Things like helicopter money, as it’s sometimes called, is part of a potential package. But obviously it has downsides as well because it’s not particularly targeted,” Robertson said. “There are upsides and downsides to all of these options, and that’s what we have to work through.” 

Get ready: The amounts being proposed are $1500 for adults and $500 for children. It’s estimated the cost of the handout would be between $6-7 billion.

Tourism shock: Already reeling from the impact of Covid-19 and the loss of its entire visitor market, Queenstown was dealt a further blow yesterday with news that one of its most iconic tourism operators looks set to suspend operations until the border reopens and international visitors return.

Ngāi Tahu Tourism, which operates Shotover Jet, is proposing to suspend all its tourism businesses including Dart River Adventures, based in Glenorchy, Franz Josef Glacier Guides, Vantage Helicopters and the Franz Josef hot pools on the West Coast until business returns to normal – whenever that will be. See more in our article here.

Devastating: The decision, which is subject to a period of consultation, would result in more than 300 redundancies. The company said it was a “difficult decision’’ but had been made after robust analysis and discussions.

Pay cut for special leave: Staff at big four accounting firm KPMG earning more than $55,000 a year will be hit with a 15 percent ‘voluntary’ salary sacrifice for the four months from May to August, in return for 12 days of special leave. The move will affect 70 percent of its workforce. KPMG is the latest businesses to announce salary cuts along with Fletcher Building, Air New Zealand, and several media companies who have all announced similar cuts in recent weeks. KPMG is also cutting partner drawings by 20 to 40 percent.

Earnings downgrade: Genesis Energy has cut its full-year earnings guidance by $5 million, saying that lower-than-expected production from its Tekapo and Waikaremoana hydro schemes would likely affect its earnings for the year. Drought conditions in the North Island had reduced generation inflows this year, prompting an earlier downgrade by the company in February.

Not the only one: Rival Mercury NZ also reduced its guidance this week. Genesis said it now expects June-year EBITDA of $355-365m, down from its February forecast of $360-$370.

The outcome: Genesis shares closed up 1 percent on the news at $2.81.

Under pressure: The NZ sharemarket is struggling to reclaim its highs from Monday after wiping out an early 220-point gain shortly after the market opened. The NZX50 ended the day up just 0.3 percent at 10,446. Some of the investor optimism that was apparent in recent weeks following the March 23 low seems to have dissipated as investors consider the reality that businesses still face significant headwinds as a result of covid-19. In Australia, the ASX200 ended the day flat at 5217 having also lost a 1 percent gain at the open.

Turning off the taps: In the wake of this week’s collapse in oil prices, U.S. frackers are on track to suffer its biggest monthly decline in history, according to independent consultants Rystad Energy in a new report. The total number of fracking operations is expected to plunge by 60 percent in April from the peak earlier this year. Some experts have argued that shale oil wells will be damaged during forced “shut-ins” making it difficult to turn them back on. That could limit the ability of U.S. shale companies to respond to higher demand when it eventually returns.

Carnage: In a $20 oil environment, it’s estimated more than 500 US oil exploration and production companies will file for bankruptcy in the next 12-18 months according to Rystad Energy. Even in a $30 environment, more than 200 U.S. producers will go bankrupt, Rystad said. Most are expected to force to liquidate altogether, rather than restructure through Chapter 11 proceedings because of a lack of finance.

Don’t get sued: Business groups in the U.S. are calling on the federal government to shield companies from litigation if they expose employees to Covid-19 infection by calling them back to work before the pandemic abates. Even as they do so, however, they face accusations that they are exaggerating the threat of being sued to weaken hard-fought employee protections. As state governors diverge on the question of when companies should reopen, employers are calling for more clarity on how to resume operations without endangering their staff or exposing themselves to liability.

We got your back: In the world’s most litigious country the National Association of Manufacturers warned that officials could not restart the economy without providing “strong liability protections” for business. It urged U.S. lawmakers to limit lawsuits claiming damages for Covid-19 exposure in the workplace, make public nuisance claims from states “off limits” and prevent the “creative use” of tort claims such as negligence or wrongful death.

Borrowing binge: The UK government has announced plans to quadruple its borrowing plans over the next three months as it grapples with the severe contraction of the economy during the coronavirus pandemic and additional pressure on the public finances. Britain’s Treasury said it would seek to raise £180b (NZ$372b) over the next quarter to allow it to meet its spending needs as tax revenues plunge.

Not enough: As recently as the March 11 Budget two weeks ago, the Government thought it would need to raise only £156b (NZ$322b) for the whole 2020-21 financial year. Bond markets showed little reaction to the announcement, with UK borrowing costs remaining close to all-time lows. The 10-year gilt yield was steady at 0.33 percent.

Here we go again: Argentina failed to make a US$503 million debt payment due this week, setting the clock running on what is expected to be a ninth sovereign default. The decision came one day after economy minister Martín Guzmán said that Buenos Aires would be unable to make any debt payments in the coming days.

30 days to pay: By failing to make the payment, the government marked the beginning of a 30-day grace period during which Argentina must pay up to avoid defaulting on US$65b of foreign debt owned by private creditors. Last week the government made an offer to suspend all debt obligations for three years and impose a “haircut” of 62 percent on interest payments worth almost US$38b.

No way, Jose: The proposal also included a 5.4 per cent reduction in the face value of the debt, equivalent to about US$3.6b. Three major creditor groups announced on Monday that they would reject the proposal. 

Andrew Patterson is Newsroom's Markets Editor and has worked for decades as a financial journalist, radio presenter and editor with Australia's ABC, Radio Live and NBR.

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