The Government’s $12.1 billion Covid-19 coronavirus business package, announced this afternoon, sees a $8.7 billion injection into business and jobs including wage subsidies and tax changes, as well as $2.8 billion for a permanent boost to benefits and doubling the Winter Energy Payment, and millions into health.
Prime Minister Jacinda Ardern said the economic impact of coronavirus “will be large and it will be across sectors, across regions".
“Some businesses will not make it through this,” she said.
Worth four per cent of GDP, Finance Minister Grant Robertson called it “one of the largest in the world on a per capita basis”.
Overview of the Covid-19 business support package ($12.1 billion overall):
Business and jobs ($8.7 billion), of that:
$5.1b in wage subsidies for businesses impacted by coronavirus
$2.8b in tax changes for businesses
$126m for self-isolation and coronavirus leave support
$600m in initial aviation support (this does not include payment to Air NZ).
Income support and boosting spending ($2.8 billion):
Permanent benefit increase of $25 per week
Double Winter Energy Payment for this year
$100m redeployment package
Health ($500 million)
$32m for ICU capacity and hospital equipment
$50m GP support and primary care
$20m to improve video conferencing
$20m for Healthline
“It is just the beginning,” Mr Robertson said. He added May’s Budget 2020 has been completely recast as a ‘recovery budget’.
“We are facing severe economic consequences. Six weeks ago none of us thought we would be here. We are now faced with health, social and economic dire consequences…or taking on unprecedent decisions.
“Tough, decisive measures to give us a fighting chance. I make no apologies for what we have done. We are acting now.”
He warned to expect deficits and higher debt over the near-term, saying that Core Crown debt would go over the range of 15-25 per cent of GDP, with the Government currently sitting at 19.5 per cent.
“This is the rainy day we have been planning for. We will get through this crisis."
Business and jobs
The $5.1 billion for wage subsidies will go to any business that has had a 30 per cent or more decline between January to June 2020.
Employers would be paid $585.80 per week for full time staff and $350 for part-time workers, with payments capped at $150,000 per business, and will be available for 12 weeks and paid in a lump sum.
The $126 million set aside for coronavirus-related leave and self-isolation support for people unable to work will be equal to the amount paid for the wage subsidy scheme and available for up to eight weeks. It is estimated 27,000 workers could take it up every two weeks for the next eight weeks.
The redeployment package will see the Tairāwhiti region the first to benefit, with Mr Robertson saying that decision was due to the hard-hit forestry industry.
Tax changes for small businesses sees the threshold for provisional tax going up from $2500 to $5000.
Depreciation deductions for commercial and industrial buildings will be reinstated, interest will be waived on some late tax payments of businesses impacted by coronavirus, and there will be immediate deductions for low-value assets.
A temporary increase in the threshold will go up to $5000 for one year.
Income support and boosting spending
Benefits will increase by $25 a week from April 1 and the Winter Energy Payment will be doubled for this year, increasing to $1400 for couples and $900 for singles.
Deputy Prime Minister Winston Peters said increasing the Winter Energy Payment “will be massively beneficial for those most susceptible – our seniors”.
“This package is about protecting New Zealanders’ health, protecting the vulnerable, protecting livelihoods and ensuring the quickest recovery possible on all fronts. “
The benefit increase comes on top of the increase from indexing benefits to average wage growth, which was estimated to increase benefits by about $11 per week.
Health Minister David Clark said the Government must plan and prepare as they “know we will see more cases of Covid-19 arrive here”.
“Staff in our public health units are our first line of defence against infectious diseases, but they don’t have the resources they need to handle a pandemic.
“So we’re putting more than $40m immediately into public health, with a strong emphasis on contact tracing,” Dr Clark said.
Part of the $50m investment to primary care would go to community-based assessment centres, equipment and logistics.
The $20m for video conferencing would be used for health providers to conduct consultations.
Healthline’s $20m boost was intended to see an increase of doctors and nurses hired “to deal with the unpreceded level of demand”, which currently sits at about 5000 calls a day.
“These targeted and immediate investments will significantly strengthen our ability to respond for Covid-19. There will be further announcements.”
Government officials say $205m has been set aside for ensuring New Zealand has sufficient medicines, flu vaccines, facemasks and protective equipment. Government plans to spend $50m to further enhance primary care and community-based services.
New Zealand’s economic position
This morning, Mr Robertson said the package was “about providing cash flow and confidence to New Zealanders at this stage as we begin to deal with the impacts of Covid-19 and start to look at a recovery phase”.
“The focus is on New Zealanders, but obviously it is employers and employees bearing the brunt already of the effects of Covid-19.”
Today he said we are “well and truly” in the economic scenario three.
Last month, he outlined three economic scenarios in the face of coronavirus.
He 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".
Last week, 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 is "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.”