New Zealand’s unemployment is expected to hit 9.6 per cent next month, according to Treasury figures released today as part of the Government's Budget 2020 reveal.
“We’re answering calls for significant new investment as we face this one-in-100 year global shock and rebuild together,” Finance Minister Grant Robertson said.
“The full impact of Covid-19 around the world is yet to be seen. The depth and duration of the pandemic means that the economic outlook is highly uncertain and forecasts will change.
“But what they do clearly show is the scale of the economic challenge that lies ahead."
Treasury forecasts showed up to 140,000 jobs would be saved over the next two years, with employment growth at 370,000 over four years.
Unemployment is set to hit a peak of 9.6 per cent in June this year, bouncing back to 4.2 per cent in two years. The economy has potential to grow from July 1 this year.
Deficits will be about 9.3 per cent of GDP ($28 billion) from 2020 to 2022. This is only set to reduce in 2024 to about 1.3 per cent of GDP.
“It is then possible that the Government books return to surplus from 2024/25,” Mr Robertson said.
Projections from Treasury expect a 0.7 per cent surplus from 2024/25.
Core Crown expenses go up to 38.7 per cent of GDP in 2020, reducing to 30.2 per cent in 2024.
Tax revenue will remain at just under 30 per cent of GDP. “This means investment to grow the economy will be funded through long-term borrowing,” Mr Robertson said.
Net core Crown debt is expected to rise to 53.6 per cent in 2023 and 2024.
“Through long-term borrowing at historically low interest rates, we can currently lock-in 10-year bonds at an annual rate of below one per cent,” Mr Robertson said.
Prime Minister Jacinda Ardern said the Covid-19 Response and Recovery Fund “will deliver major investments in jobs, such as making certain trades training and apprenticeships free, the delivery of 8000 new public houses and extending the food in schools programme up to 200,000 children”.
“Treasury Budget forecasts suggest our package of jobs stimulus measures could see as many as 138,000 jobs saved in the current economic quarter alone and employment rise by 234,000 jobs over the next two years," she said.
Deputy Prime Minister Winston Peters said that “New Zealanders have made incredible sacrifices and suffered incredible loss in our collective battle against Covid-19”.
“It is vital that Budget 2020 builds on restoring independence in every sense, to every day New Zealanders by creating jobs for those who have them stripped away by this viral invasion.”