An economics expert has suggested the Government might want to reconsider its refusal to extend the wage subsidy further, despite its cost.
The subsidy, paid to employers who are struggling with the economic impact of the pandemic to help them cover wages instead of making people redundant, has been credited with keeping the official unemployment figure low.
It actually dropped over the June quarter, stunning economists - though other data released by Statistics NZ on Wednesday suggests fewer people bothered looking for work, particularly under lockdown, and others have had their hours cut back against their wishes.
Milford Asset Management senior analyst Frances Sweetman told The AM Show on Thursday it was a "strange figure" covering a "strange period".
"A better figure is the number of people on Jobseeker Support - that includes those that are working too-short hours and are actively trying to get more work. Towards the end of July that was 6.4 percent, so a lot higher - but it's still better than Australia at 7.4 and the US, which saw unemployment peak in double-digits."
The initial 12-week wage subsidy ended up helping more than 1 million Kiwis stay in work, and was extended another eight weeks for those who needed it. But it expires on September 1, and the Government has ruled out extending it - Finance Minister Grant Robertson on Thursday saying it would only be brought back in the event of another outbreak of COVID-19.
"We're moving to more targeted support in that regard. Bear in mind we've got that $14 billion that we've left on the table to make sure we can adjust and adapt to whatever circumstances arise. I think that's the right thing to do in an environment of so much uncertainty."
He said the wage subsidy extension was only taken about by about half the number of employers the Government expected, suggesting the economy was bouncing back better than expected.
"With the wage subsidy in particular, we were able to cushion the blow of the initial impact of COVID-19. It also reflects the fact we came out of lockdown in the beginning of June and that the economy has got itself up and going again."
To July 24, $13 billion had been spent on the wage subsidy. Around 17 percent of jobs are still being supported by it.
"That is a large number of people, and that's due to expire on September 1," said Sweetman. "We're going to have this period where we'll see potentially a lot of people come onto Jobseeker Support and into that unemployment rate, unless the wage subsidy extension gets extended again."
Robertson says many of them will probably end up on the COVID-19 Income Relief Payment (CIRP), which doesn't count towards the official unemployment rate, despite being pretty much the same thing - just more lucrative for the recipient. It only lasts 12 weeks though, so Robertson expects the September quarter unemployment figures to worsen considerably from June's.
"We have said all along the worst impacts of it, from an economic point of view, weren't going to be felt until the September quarter data... What we want to do is commit ourselves to making sure that we keep [unemployment] under that 10 percent level. We want to make sure we drive it down as far as we can. But making forecasts and predictions in this environment, as we saw yesterday, is pretty tough."
Sweetman said even though it's costing $500 million a month now, about 2 percent of GDP, New Zealand can afford to keep the wage subsidy going a bit longer if we have to.
"It is a big number, and we already have the highest level of Government GDP that we've ever had - over 50 percent. But we're still relatively a lot better off in terms of that Government debt rate than other countries. So there is the ability to extend it and have kind of a glide path so these people can retrain and businesses can pivot."
Debt last peaked at over 50 percent of GDP in the early 1990s.