Finance Minister outlines development of worst-case scenario economic plan

Grant Robertson.

The Government is developing a 'macroeconomic package' if the impact of Covid-19 causes a major, sustained global economic downturn. 

Today, Finance Minister Grant Robertson spoke to the Wellington Chamber of Commerce about the impact of coronavirus on the New Zealand's economy. 

Grant Robertson appeared on Q+A to talkabout the impact coronavirus may have on the country’s economy.

He said New Zealand's predicted impact was a "longer lasting shock to the domestic economy, as the global impact feeds through to the economy for the whole of 2020, and where there are cases in New Zealand".

"That is the phase we are in and where we are deploying our plan to target those workers, businesses and industries most affected."

Grant Robertson talked to TVNZ1’s Breakfast about how New Zealand’s economy will be hit by the outbreak.

Mr Robertson also spoke of preparations if the economic impact was to worsen and if New Zealand's economic 'scenario three' was to be put in place. 

Last month, he outlined three economic scenarios in the face of coronavirus - at the time New Zealand was predicted to be facing 'scenario one', which was a "temporary but significant impact on the New Zealand economy across the first half of 2020". 

On March 3, Mr Robertson told Parliament, New Zealand was moving towards scenario two, "which is based on a longer-lasting shock with global impact feeding through to the economy for the rest of 2020". 

He also had described scenario three as "one where the virus outbreak becomes a global pandemic, that in turn creates a global downturn or even a global recession".

Today, Mr Robertson said, "clearly, things have been moving quickly - the point we've been making all along is we are planning for scenario three, regardless of if we are predicting it."

Part of that is preparing a 'macroeconomic package' if the economic impact increases "causing a major, sustained global downturn". 

"Under this scenario, I have instructed officials to develop longer-term macroeconomic measures that may be required to support the economy, businesses, and workers if there is a major, sustained global downturn.

"Such measures could include tax and welfare changes that support incomes and consumption, and help businesses stay afloat.

"We want to make sure that this scale of intervention would not only support incomes but also our overall economic, environmental and social goals.  

"While are planning for that situation, we are not predicting it, but planning for it is the responsible thing to do."

When asked today how the World Health Organisation's declaration of coronavirus as a pandemic would impact New Zealand, Mr Robertson said it would make little difference. 

"Our pandemic plan has been rolled out since the beginning of the year," he said.

"Really the WHO announcement today reinforces that was a good thing to do, I think they are particularly targeting countries who haven't done that work already, but it certainly makes it clear to all of us this is a global health crisis."

Mr Robertson previously said scenario three could see direct income support measures implemented, with tax cuts a possibility or one-off cash payments. 

"In such circumstances it may be necessary to consider immediate fiscal stimulus to support the economy as a whole and businesses and individuals through this period," he said in February. 

"These scenarios are all temporary. The effects of this virus will pass. We are in a strong position to handle these scenarios."

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