COVID-19: $12 billion package includes wage subsidies, tax relief and sick leave support amid coronavirus pandemic

The Government's COVID-19 economic support package is worth $12.1 billion, almost half of which covers immediate wage subsidies for businesses affected by the coronavirus pandemic.

The package - representing 4 percent of New Zealand's GDP - also includes sick leave subsidies, an aviation support package, a huge boost for the health sector, and some tax relief changes. 

The Government already announced the details of a $12 billion infrastructure package earlier this year, and is still yet to announce details of Budget 2020.

And Finance Minister Grant Robertson insists this is "just the beginning".

"I want to make it clear that this is not a one-off package... As we go through this crisis towards economic recovery the Government will be constantly monitoring the situation and adjusting its response."

The package includes:

  • $500 million boost for health sector
  • $5.1 billion in wage subsidies for affected businesses in all sectors, available immediately
  • $126 million in COVID-19 sick leave and self-isolation support
  • $2.8 billion for income support, including $25 per week benefit increase and a doubling of the Winter Energy Payment for 2020
  • $100 million redeployment package, to help employees train to work in other industries
  • $2.8 billion in business tax changes, including a provisional tax threshold increase, and writing off interest on some late payments of tax
  • $600 million initial aviation support package

By comparison, Australian Prime Minister Scott Morrison announced last week a $17.6 billion (NZ$18.2 billion) coronavirus stimulus package, with more than six million Australians set to receive a one-off payment of AU$750 (NZ$775).

Wage subsidies

Businesses will be eligible to apply for wage subsidies if they can show a 30 percent decline in revenue for any month between January and June 2020 compared to the year before - including projected revenue.

If it's approved, employers would be paid $585.80 per week for full time staff, and $350 for part time staff. The payments have a limit of $150,000 per business, and it will be paid in a lump sum.

It will be available for 12 weeks with application available immediately. Businesses will have to show how they plan to fight back against the spread of COVID-19.

Wage subsidies have been used by the Government before, such as in 2011 following the Christchurch earthquake when then-Prime Minister John Key announced a subsidy for some employers.

The National-led Government at the time also handed out job loss cover, specifically $400 a week in hand for a period of six weeks paid to fulltime employees and $240 for part-time workers.

COVID-19 sick leave and self-isolation support

New Zealanders who are unable to work because they are sick or in self-isolation or caring for someone who is sick, will be eligible for the wage subsidy scheme.

The payments will be equal to what's been outlined in the wage subsidy scheme, and they will be available for a period of eight weeks. Employers will still have to meet all of their sick leave and other employment expectations.

Robertson said payments will be available in five working days. 

What else can you expect?

The Government is increasing the main benefit by $25 per week from April 1. This will coincide with the increase in the minimum wage, which comes into effect that same day.

The Ministry of Social Development expects that the benefit increase will raise the incomes of about 350,000 low income families, and "act as a stimulus".

"We are acutely aware that more people might end up on the benefit," Robertson said. He said the Government had considered increasing the benefit in Budget 2020.

The Winter Energy Payment for 2020 has been doubled to $1400 for couples and $900 for single people. It's estimated about 850,000 recipients will benefit from it with more than 1 million expected to benefit once partners of recipients are included.

Also coming into effect on April 1, the threshold for provisional tax will lift from $2500 to $5000, with the aim of reducing cash-flow pressure on businesses.

Provisional taxpayers are people who earn income other than a salary. At the moment, you have to pay provisional tax if you had to pay more than $2500 tax at the end of the year from your last return.

The Government also plans to waive interest on some late tax payments. Again, it will only apply to those who can prove they are struggling financially because of COVID-19-related pressures and unable to pay their tax on time.

As for the aviation sector, the COVID-19 Cabinet Committee is still in discussions on a package of measures to protect supply chains. The $600 million announced does not include any support for Air New Zealand, so this could come later.

Gisborne will be the first to benefit from the redeployment package - it's a scheme that has already been signalled by Prime Minister Jacinda Ardern, after some industries in the region such as forestry immediately felt the weight of China's economy slowing down.

"We do not yet know what the full impact on New Zealand's economy will be, however we do know it will cost us jobs and have a significant impact on business," Robertson said.

"We are moving quickly to help people stay in work and reduce the blow for business."

What's happened so far?