The Government is set to announce measures in the coming days to support businesses struggling with commercial rent during the Covid-19 lockdown.
After wages, rent and utility costs are the next biggest issue many employers are grappling with after the pandemic sent shockwaves through New Zealand's economic infrastructure.
Finance Minister Grant Robertson said more details would be coming, concerning commercial landlords and rents during the lockdown period. It comes after the Government made swift changes to residential rental properties, placing a rent rise freeze for six months and altering eviction rules.
The Epidemic Response Committee, led by National's Simon Bridges, which has been set up to scrutinise the Government's response to coronavirus, yesterday focused on health and today pulled apart the economic plan and policies since the Covid-19 fallout.
Lockdown impact on business
Economist Shamubeel Eaqub warned the committee of the "unchartered waters" the country has found itself in after the sudden stop to the economy, saying the Government needed to be "quite careful" about extending New Zealand's Alert Level 4 lockdown, which is set to last for a minimum of four weeks.
"We will see many more businesses fail the longer this lockdown goes, unless there are many more generous provisions."
That was partially due to the build up of costs of commercial rent and utilities, on top of wages, while businesses were unable to operate.
He also said the country should be prepared for a big increase in demand for the welfare system after Level 4 lifts due to border changes and global uncertainty, and that "new entrants to the workforce are going to find it very challenging, probably going to be delayed in their careers by many years".
"I think the global backdrop is going to be very challenging compared to past recessions... It is going to be a very expensive recession."
Grant Robertson spoke of the "no regrets" approach the Government has taken to spending during the Covid-19 pandemic, after billions was poured into the response in just a matter of weeks.
Mr Robertson said that means "there will be mistakes" made, due to the Government making decisions rapidly to respond to issues quickly.
Mr Robertson acknowledged rent and utilities were a big cost for SMEs, and revealed the Government was working with the sector to create a package to "deal with that" - including further potential changes to the tax system.
He also said an update to the law around insolvency would be expected soon.
The Covid-19 economic fallout would move net debt "well beyond" the Government's rule of staying between 15-20 per cent of GDP - sitting at 19.2 per cent in Treasury's last interim statement - Mr Robertson said.
"GDP is going to take a serious hit, as well unemployment and I have no doubt this shock is a quantum greater than the GFC."
This was echoed by Treasury's Caralee McLiesh, who said they were still finalising numbers, but said Covid-19 would cause a "severe and negative contraction in the economy".
She said other forecasts they were looking at predicted a reduction in GDP of between 10-17 per cent for the June quarter and a "very significant" increase to unemployment which could range between five per cent to "double digits".
New Zealand's unemployment rate sat at four per cent for the December 2019 quarter, according to Stats NZ.
Wage subsidy scheme
Reaching $4.2 billion paid out yesterday, Mr Robertson expected that figure to rise to $5 billion today.
Mr Bridges questioned Mr Robertson on the amount paid out under the scheme, asking whether the amount was enough to keep workers in some jobs, suggesting it be moved up to the median wage.
He called a potential increase a "much more realistic proposition for larger and higher wage businesses".
The scheme is $585.80 per week for full-time workers and $350 for part-time workers. It is paid in a lump sum over seven weeks. Overall, a full time worker's total payment is $7,029.60.
Mr Robertson said the level was chosen as it was the maximum level of the Paid Parental Scheme, but they would continue monitoring it.
The estimated cost of the wage subsidy scheme jumped in only ten days from $5.1b on March 17, to an estimated cost of between $8b to $12b on March 27.
The minimum wage rose to $18.90 an hour today from $17.70 an hour, which would mean an extra $48 a week for Kiwis working full-time.
When asked of the strain this could put on already struggling business, Mr Robertson said he had confidence businesses were "ready" for the increase and reiterated he would monitor the wage subsidy scheme.
The Opposition had been calling for the Government to put off the rise, saying businesses were "already facing huge financial struggles" due to the coronavirus pandemic.