Coronavirus: Government relief package 'a nice balance' - economist

Finance Minister Grant Robertson has released details of the Government's COVID-19 relief package.
Finance Minister Grant Robertson has released details of the Government's COVID-19 relief package. Photo credit: Supplied.

The Government has released initial details of its support package for businesses impacted by COVID-19.

The $12.1 billion package includes $5.1b for wage subsidies, $500m for health, $2.8b to support the country's most vulnerable - including a $25 weekly benefit boost - and $600m to the aviation industry.

Finance Minister Grant Robertson said that this is one of the largest COVID-19 responses in the world on a per-capita basis - nearly 4 percent of New Zealand's GDP.

"Under this plan, the health system is increasing capacity and capability to test and treat cases," Robertson said.

"Our actions in the next 30 days will be split into two phases: immediate actions include a public information campaign, upscaling testing, boosting Healthline, surging containment and isolation procedures, establishing community-based assessment clinics and a system focused on meeting workforce demand and PPE (personal protective equipment) needs." 

The Government will also introduce a COVID-19 leave payment scheme to incentivise self-isolation by employees, the self-employed and contractors, a $100m redeployment package and $2.8b in business tax changes, including an increase to the provisional tax threshold.

Following the announcement, economist Shamubeel Eaqub said the package was "excellent" and "well-balanced".

"The size of the stimulus is bigger than what any other country around the world has done.

"It has gone quite broad, looking at the public health crisis by investing in the public health system, retaining jobs and avoiding business closures," Eaqub said.

The practicalities of payments for people going into self-isolation are also applauded.

"The risk of people losing jobs because they have to keep other people safe is reduced," Eaqub added.

The increase in benefit payments means that money is going to be spent, as beneficiaries are more likely to spend their money than save, meaning it will go back into the economy. 

"This is going to create a cash injection in terms of household spending and retail spending."

"It's a nice balance in terms of responding to the crisis and putting in place some [tools] to help people spend more money," Eaqub added.

CEO of BusinessNZ Kirk Hope said on top of the large-scale infrastructure spend this is a very big stimulus package.

"This is a really strong and balanced response from the Government to help support New Zealand businesses - and the economy," Hope said.

The process to get the wage subsidy is fairly low-touch for employers.

"They've got to answer a range of questions and provide a declaration that what they're saying is true and correct.

"The Ministry of Social Development (MSD) has indicated they'll provide the funds within five days," Hope added.

Referring to the $500m for health, Hope said that it's important to make sure money goes towards testing and contact-tracing.

"That's been demonstrated in other economies to arrest the trajectory of the virus and that's your best chance of an economic recovery," Hope said.

From a tourism perspective, CEO of Tourism Bay of Plenty Kristen Dunn said the package looks "really comprehensive".

"I think its targeted different-sized businesses in a relevant way," Dunn said.

"We're hit with forestry and agriculture: tourism is alongside those."

Having spoken with local tourism operator 'The Aviator Experience' following the announcement, he and other business owners are encouraged.

"We're having a forum with our local businesses on Thursday, with accountants, bankers and [other]  advisers on hand to go through the package, assist with financials and what our 'destination recovery' short-term plan looks like," Dunn said.

"They're dealing with so much at the moment: having someone there to talk them through it and [possibly] help with the application is really important," Dunn added.

Referring to the relief package as "practical and reassuring", John Milford, chief executive at Business Central said that it contains practical measures that will help reassure businesses and the public.

"The targeted support to help keep businesses afloat and people in vulnerable sectors in work, and the boost for welfare beneficiaries to encourage them to spend more, will help ensure the economy ticks over."

He said that it's clear the Government has listened to business, but expects there's more to come.

"This year's Budget will provide the opportunity for a second bite at this and we look forward to seeing what that holds."

At Tuesday's announcement of the relief package, Finance Minister Grant Robertson said that a recession in New Zealand is now "almost certain" and the advice is that the shock will be larger than that seen during the Global Financial Crisis (GFC).

"This will affect every part of our economy now, and for some time to come.

"We will have an extended period of deficits, and our debt as a country will have to substantially increase," he said.

Referring to the Government's response package as the "largest investment in our lifetimes", Robertson said it was designed to help "cushion the blow" of disruption caused by COVID-19.

"It comes on top of the $12b New Zealand upgrade programme."

Acknowledging the current uncertainty and anxiety among many New Zealanders, Robertson's message was simple.

"I want to say directly to those people: we will get through this, together."