The wage subsidy extension has not been taken up to its full extent in a positive sign for the New Zealand economy, according to Finance Minister Grant Robertson.
The wage subsidy saw 1.7 million New Zealanders receive extra cash from the Government as businesses struggled to stay afloat amid the Covid-19 pandemic. A further 437,000 New Zealanders were on the extended wage subsidy as of mid-July.
"The wage subsidy extension hasn’t been taken up to the extent that we thought it may have been," Mr Robertson told TVNZ1's Q+A today.
"That’s actually a positive sign, because it means that the head start that the New Zealand economy has had from coming out of Level 1 a bit earlier is flowing through."
While helpful, the subsidy won't be enough to save every job, especially in the tourism and international education sectors, Mr Robertson admits.
However he couldn't make any projections to the number of jobs that will be lost after the subsidy ends, saying it's "extremely difficult to be able to get that down to particular numbers".
Some of the impacted companies have been able to keep trading and do "relatively well" during June and July, "so I expect those people will keep their staff on", Mr Robertson says.
"There will, however, be some businesses where they won’t be able to keep all of their staff on. We’ve recognised that, and that’s why we’ve put in place the Covid Income Relief Payment," he says.
That 12-week relief payment is the equivalent of the Wage Subsidy Scheme, before the Government moves towards "more targeted support for particular sectors", including tourism.
"I certainly think that the vast bulk of those people will continue and work, even though their businesses have taken the Wage Subsidy Extension on. We have seen trading being far ahead of where people thought, so it’s a recognition and a reflection of the fact that things have been tough. But I still expect the vast bulk of those people to stay in work."
He says the improved business environment has allowed businesses and companies to rehire staff.
Mr Robertson says the idea of a trans-Tasman bubble was not the reason behind the decision to extend the wage subsidy, but "more about the fact that we recognised that the ramping up of business was going to take a bit longer".
"I’ve often said the economy is more like an oven than a light switch; if you turn it off, it takes a while to warm back up again.
"The extension of the wage subsidy scheme was a recognition that, for some industries — retail, hospitality, tourism — it would take longer. Of course a trans-Tasman bubble would’ve been great in terms of that, but, actually, that wasn’t the determining factor."
According to data and forecasts, Mr Robertson said projections indicate the June quarter will be the "worst" of the economic impacts, before the country comes out of it in September and December.
However, there will "still be pressure" on our economy as the rest of the world continues to struggle to stop the spread of the virus.
He said the economic situation will "probably balance out" to be "about where we are" in the first half of next year.
"But that will depend a lot on what happens with the virus, which, of course, as we know, is unpredictable."