Jacinda Ardern explains what happens when the COVID-19 wage subsidy scheme runs out

Prime Minister Jacinda Ardern hopes the Government's "other forms of support" will cushion the blow when the wage subsidy scheme comes to an end on September 1. 

The Prime Minister on Sunday announced plans to extend the small business loan scheme until December 31. This allows small businesses to borrow up to $100,000 - depending on the number of staff - interest-free if prepaid within a year. 

But Ardern also confirmed there are no plans to extend the wage subsidy scheme again, because it was already extended back in May - and the Government wants New Zealanders to make the most of its other support mechanisms.  

"We've already had one extension of the wage subsidy that was in response to businesses particularly working in areas like tourism that said that little extra time would help to pivot to new parts of the market, particularly the domestic market," Ardern told reporters. 

"But we've also used that as a time to signal that we will have to move into other forms of support... We've clearly signalled that a wage subsidy is not something that can continue on in the never-never. 

"It would delay the critical work that businesses may need to pivot in the new COVID environment... Businesses themselves have said they think continuing for too long could run the risk of being harmful for the long-term resilience of some of those businesses."

The latest Government figures show $12.3 billion has been paid out for the wage subsidy scheme, with more than $200 million paid back in refunds. 

In her speech to Labour supporters, Ardern thanked businesses who passed on the wage subsidy. 

"To all those businesses who passed on that wage subsidy and provided that shelter to others, who worked so hard and gave so much to help over 1.6 million New Zealanders people put food on the table - ngā mihi maioha to you."

Ardern mentioned the $400 million tourism recovery fund as an example of ongoing support. Unveiled in Budget 2020, it includes a strategic asset protection programme which has so far helped the likes of Discover Waitomo and Whale Watch Kaikōura.

But the fund was criticised by National as narrow after Tourism Minister Kelvin Davis said only around 60 tourism businesses would be supported by the programme out of an estimated 38,000 tourism businesses in New Zealand. 

Ardern acknowledged the difficulties facing businesses in the COVID-19 economic slowdown, and said anyone who finds themselves out of work can turn to the Government's Income Relief Payment scheme. 

Launched in May, the scheme ensures that New Zealand citizens or residents who have lost their job because of COVID-19 can receive tax-free weekly benefit payments - almost $500 for full-time workers and $250 a week for part-timers.  

But the scheme raised concerns about the fairness of New Zealand's welfare system. 

The Income Relief Payments is $490 a week tax-free. By comparison, the jobseeker benefit is basically half that after tax - $250 a week. 

"It shows just how unliveable and low the current benefit rates are," Green Party co-leader Marama Davidson said at the time.  

The scheme, expected to cost the Government half-a-billion dollars, will finish in October, and those people who do not do not manage to find work during the time receiving the payment will have to go onto the Jobseeker benefit. 

As of June 26, more than 10,500 people were receiving the COVID-19 job loss payment, of which more than 9500 were full-timers and 990 were part-timers. 

Ardern said the small business loan scheme will keep helping businesses at a time when they can take advantage of operating in one of the most open economies in the world. 

"What we've heard from businesses is they've drawn it down to not necessarily needing it straight away but being concerned that they wouldn't be able to access it down the track," she said of the extension. 

"What this does is say if you don't need it you don't have to apply but it will be there and it will be there for several months and it gives that just extra layer of certainty and reassurance in a time that is so uncertain."

As at July 3, 90,485 small businesses had applied for more than $1.51 billion of loans since May 12. The average value of each loan is around $16,700.