Coronavirus: Business leader urges 'rethink' of essential services, wants 'more generous' wage scheme

A New Zealand business leader is urging the Government to "rethink" what defines an essential service during the lockdown and says the wage subsidy scheme should be "more generous" over time. 

Former Business New Zealand chief executive Phil O'Reilly told the COVID-19 Epidemic Response Committee on Wednesday that the majority of businesses he's spoken to support the Government's 'go hard, go early' response to the coronavirus. 

But as much as public health is a priority for businesses, O'Reilly said the economic health of the country cannot be overshadowed, telling the committee: "Good public health and good economic health are two sides of the same coin."

He said he doesn't think the Government is doing a "poor job", pointing to the multibillion-dollar wage subsidy scheme as a welcome initiative, but to get businesses through the other end of the lockdown, he said it should be increased. 

The scheme should be "more generous as more time goes on" and be "redesigned" so that the responsibilities of employers and employees are crystal clear and officials won't be inundated with requests for advice, O'Reilly said. 

The wage subsidy scheme has so far paid out $6.6 billion and is subsidising more than a million New Zealanders - almost a fifth of the population - with a total of 305,363 applications made. 

For businesses that take up the scheme to support their staff, $585.80 a week is given to full-time workers who worked 20 hours or more per week before COVID-19 and $350 a week for part-time workers. 

The money is paid out in lump sums, meaning an employer should get $7029.60 for a period of 12 weeks - the time limit set by the Government - to pass on to their worker. 

To be eligible, businesses have to demonstrate a 30 percent loss in revenue compared year-on-year, and those businesses that qualify must pass on the full amount to their workers. 

O'Reilly said while it has been welcomed by businesses, wages aren't the only cost they are facing: he urged the Government to consider commercial rent support, with less than half of businesses continuing to operate in lockdown. 

A survey by Auckland Chamber of Commerce has found that 30 percent of businesses who took part have indicated they won't survive COVID-19, and assistance for rent and tenancy costs was highlighted as something that could help.

Former Business New Zealand CEO Phil O'Reilly.
Former Business New Zealand CEO Phil O'Reilly. Photo credit: Parliament TV

Another way the Government could shield businesses and workers from an economic slump is to follow Australia and give cash injections to businesses, O'Reilly suggested. 

The Australian Federal Government announced plans last month to transfer up to AU$50,000 (NZ$51,600) to small and medium businesses and another injection of the same amount in the new financial year, to prevent widespread layoffs. 

O'Reilly said another area of concern for businesses is confusion around what defines an essential service during the lockdown, with some businesses telling him the rules don't seem fair. 

"I use that worn fairness intentionally," O'Reilly said, explaining how if a business feels fairly treated, they will be more likely to support the Government, hence business confidence will increase. 

O'Reilly said if a business can demonstrate good compliance with coronavirus precautions, then "in principle, it should be allowed to open or open in part". 

It comes after Prime Minister Jacinda Ardern ruled against butchers and greengrocers opening alongside supermarkets and dairies during the lockdown but allowed them to sell through supermarkets and online. 

O'Reilly said eventually, the Government will need to figure out how to ensure small businesses don't fold, and that could include new measures to incentivise them to grow and build confidence. 

He suggested scrapping fees for small businesses, conducting an urgent review of the regulations keeping small businesses from thriving, and making industry training free to get more people into jobs that will be essential for New Zealand to grow. 

The Government could also offer cash grants to get small businesses up and running, heavily invest in digital capabilities, and scale-up support for business advisory, O'Reilly suggested. 

"This might seem radical, but all of those things are currently being considered and undertaken by other counties in response to the crisis," he told the committee. 

"Businesses would really understand the Government has their back and enable them to build confidence to grow and it will support the public health of our nation."

The COVID-19 pandemic has weighed heavily on the Government's finances, with several billion-dollar packages and initiatives announced to help workers and businesses. 

  • Wage subsidy scheme worth between $8 billion and $12 billion 
  • $500 million increase to public health funding for the immediate response
  • A six-month deferred mortgage scheme for home-owners affected by the virus - part of $6.25 billion Business Finance Guarantee  
  • A doubling of the Winter Energy Payment 
  • An increase to main benefits
  • Rent freezes and a ban on terminations of tenancies/evictions other than in exceptional circumstances
  • Plans to allow COVID-19-affected businesses to temporarily place existing debt into "hibernation"