Coronavirus: Grant Robertson puts billion-dollar price tag on new wage subsidy extension

Auckland's two weeks at pandemic alert level 3 will cost the taxpayer about another $1 billion in wage subsidies, the Finance Minister estimates.

The new cluster of COVID-19 cases, whose origin remains unknown, has the country's largest city at level 3 and the rest of the country at level 2 until at least the end of Wednesday, August 26.

So far the wage subsidy, paid to employers who can prove a loss of revenue directly caused by the pandemic and lockdowns so they can keep staff on, has cost $13.1 billion. So far it's worked, with unemployment not yet blowing out as many had predicted. Jobseeker Support numbers have only marginally increased since April, and the official unemployment rate actually fell in the most recent quarter.

After Cabinet meets on Monday, Robertson will reveal the "finer details" of the second extension to the scheme, which will otherwise be largely similar to what' already been proven to work.

"We're going to build on what's worked,because we know the wage subsidy scheme has worked. Obviously with these restrictions right around New Zealand, it's being felt again," he told The AM Show on Monday.

"If it needed to go longer - and that's a big if - we would look at that, but for now we are looking at two weeks."

The extension will be available to businesses nationwide, Robertson acknowledging the outsized effect Auckland has on the national economy.

"A lot of businesses sell into Auckland, we've got tourism operators who rely on people from Auckland coming to visit them. It will be significant, but as you know we've put money aside for this. We've actually got an underspend in the current wage subsidy extension so there's enough money for us to be able to manage this and support people through it."

Economic activity rebounded much better than expected once the country went into level 1, after successfully stamping the virus out earlier this year and going more than 100 days without any new cases detected in the community. 

"We worked very hard to go hard and early and get ourselves back up and running, and you saw the benefits of that in June and July where we saw economic activity in July - on one index I've seen - being better than it was the previous year."

Fewer people than expected needed the wage subsidy extension, freeing up money. But the virus' spread and its economic impacts are unpredictable - some countries which didn't lock down in an effort to keep their economies afloat have actually suffered greater unemployment and bigger drops in GDP than New Zealand, which for a time had some of the tightest restrictions in the world.

"From a public health point of view we know that stepping in early is the best thing to do. We stepped in with those greater restrictions as soon as we discovered this new cluster. 

"If you look across the ditch to Victoria, they waited several weeks. That means they're going to have a longer period of time in lockdown and a longer period with limited economic activity. You have to take a long-term view on this."

The unprecedented nature of the virus has made it hard to predict how much the present lockdown is going to cost. 

"We expect quite a few businesses who didn't think they were eligible now will be eligible as a result of this, and then we're also going to have this two-week one. The initial numbers we got on this on Friday were around the billion-dollar mark," said Robertson, who'll be finalising the details with Cabinet on Monday.

"People will still have to be able to show they've had a reduction in revenue, but I think one of the things people were pleasantly surprised by when we did the first two wage subsidy schemes was how quickly MSD were able to process applications, and it's one of the reasons why we want to keep the criteria as similar as possible to what camebefore.That makes it administratively simpler for MSD, and we can get money into people's pockets as quickly as possible."