Hailed as the most important of our time, Budget 2020: 'Recovery, Rebuilding Together' has been revealed.
Having moved from an election-year budget to one that’s about guarding against rising unemployment, increasing cash flow and rebuilding the economy, Budget 2020's primary concern is to cushion the blow of COVID-19.
Minister of Finance Grant Robertson has announced a $50 billion COVID-19 response and recovery fund. This includes a $4 billion business support package, including a $3.2 billion extension to the wage subsidy, a $400 million tourism recovery fund, $230 million for entrepreneurship and $216 million to boost Kiwi exports.
The wage subsidy has been extended for eight weeks to help businesses retain staff. Businesses will need to prove revenue loss of 50 percent for one month prior to the application date, compared to the same period in 2019. Government and Treasury is predicting 234,000 jobs will be saved or created over the next couple of years.
Budget 2020 also includes $3 billion of new infrastructure investment ($1.2 billion for rail, 8000 new homes for public and transitional housing), $1.6 billion for trades and apprenticeships training (includes extra tertiary education enrolments) and a $1.1 billion environmental jobs package.
Treasury economic forecasts to June 2020 show unemployment is expected to rise to 8.3 percent, GDP is forecast to drop -4.6 percent and net debt is expected to grow to 30.2 percent of GDP. The average deficit for the next two years is $28 billion.
Shamubeel Equab, economist at Sense Partners, said that the wage subsidy extension was larger than expected.
"I was expecting an extension, I'm surprised its as big as it is."
Following the Budget 2020 announcement, Newshub asked an economist and Wellington business leader to share their views, with an emphasis on help for businesses.
Emphasising that the immediate priority for small business is cash flow, Economist Cameron Bagrie said that the wage subsidy scheme has been "extremely beneficial". The extension will help - but may not be enough.
"I suspect $3.2 billion might be on the light side: that's going to get gobbled up pretty quick," Bagrie said.
"At level 2, there's still an awful lot of bleed on cash flow because the sales line is still sluggish and for some businesses (e.g. international tourism), is non-existent."
Bagrie said that the $400 million tourism recovery fund will help, but looking at the bigger picture, it's not just about money. Formation of the Tourism Recovery Ministers Group, New Zealand Futures Tourism Taskforce and Tourism transitions programme announced as part of the Budget form a big part of the industry's recovery.
While in delivering Budget 2020, the Government has stepped up to the plate, Bagrie has concerns that "borrow in hope" is not enough to achieve the desired rebuild.
"I would like to have seen more of a strategy-based narrative," he said.
"They're going to load up the balance sheet [thinking] it's going to get the economy coming out and performing well on the other side."
He said that Treasury is forecasting a 'V-shaped' recovery, where the economy is able to get back on track fairly quickly, without the need for a big re-think on how it's managed.
"What we've seen is a strong focus on near-term support [and] early stages of recovery, but there's not a lot there on the rebuild and the reset.
"The hope is that might come out of the final $20 billion that we've yet to deploy under the COVID-19 response package," Bagrie added.
John Milford, chief executive at Wellington Chamber of Commerce said that his overall impression of Budget 2020 is its "predictable in that it's big" and "good that it's in tranches".
It also offers short-term support for businesses that really need it - and investment in training.
He said that while high-level detail has been provided, detail around the second tranch of spending is still to come - a move he considers "quite smart" considering that economic impacts under the 'new normal' of the pandemic are still playing out.
At a local level, the aspects of the Budget that Milford gives the big tick are having money to upgrade interisland ferries, transport and roads. He also notes extra support given to small businesses through the New Zealand Trade and Enterprice (NZTE) regional business partner (RBP) programme.
Spend for replacement of the interisland ferries, about $500 million, is good news.
"Those were [getting] toward end of life: that's a good investment spend," Milford said.
Having previously advocated for Government spending on Wellington roads and transport infrastructure as provided for other locations, he applauds having money available for 'Getting Wellington moving'.
"We'll push hard to convince Government to pick the full cost of that up - and it looks like they've flagged that they may have to," Milford said.
"NZTE has got another $200 million, which I [believe] is to support their RBP programme, which is support for small to medium businesses - I think they'll need that."
The key for New Zealand is that given the size of the spend - and that GDP debt will double - there has to be accountability.
"What's the spend going to be [and] what are the outcomes: we really do need to see that, because this is an unprecedented amount of allocation of funds.
"Being held accountable over the next few years about how that spend is going, [including] whether it's on target and achieving the outcomes, is critical."
He said that the GDP growth forecast of 8.6 percent growth in the third year is "pretty bullish", particularly as New Zealand is dependent on the global economy.
"We go into this with a pretty strong export environment - we've got to make sure that continues.
"We need to make sure our trading agreement [and] our relationships with countries are robust: particularly China," Milford added.
He said that investment in training is something that's talked about, but in his view, never seems to be cracked.
"Technological advancements mean that an ongoing investment in training is needed to retrain people."
Although infrastructure spend may come out of the next tranch, Milford thinks the allocation of an extra $3 billion could've been bigger.
"The infrastructure spend I thought was a bit light: I was expecting [it] to be bigger than that."