First phase of Govt's Covid-19 support package worth 4% of GDP; Includes wage subsidies, benefit increases and depreciation deductions for commercial and industrial buildings

First phase of Govt's Covid-19 support package worth 4% of GDP; Includes wage subsidies, benefit increases and depreciation deductions for commercial and industrial buildings
From left: Iain Lees-Galloway, Grant Robertson, David Clark

The Government is pledging to inject $12.1 billion into the economy in what it called its “most significant peace-time economic plan in New Zealand history”.

This is equivalent to 4% of gross domestic product (GDP), which is greater than the response to the 2008 Global Financial Crisis, and greater than Covid-19 relief packages announced in Australia, the UK and the US. 

The bulk of funding - $5.1 billion - is expected to go to wage subsidies for businesses that can show a 30% decline in revenue for any month between January and June 2020.

Eligible employers will be paid $585.80 a week for full-time employees and $350 per week for part-timers. The subsidy will only be available for 12 weeks at this stage and support will be capped at $150,000 per business. 

Robertson said the $5.1 billion figure was predicated on the assumption half of businesses will use the subsidy. 

The second largest bundle of funding, worth $2.8 billion, will go towards an income support package.

This includes a permanent $25 per week increase in all main benefits from April 1.

The third largest amount of money, $2.1 billion, will go towards reinstating depreciation and deductions for commercial and industrial buildings.

Other support measures include waiving interest on some late tax payments and a $600 million support package for the aviation sector.

Finance Minister Grant Robertson said there are "ongoing discussions" underway between Air New Zealand and the Government, which is a majority shareholder. 

Furthermore, $500 million is being put towards boosting health resourcing.

This is only the first phase of support that will be provided.

The Government is still working on how larger or more complex businesses that fall out of the scope of this package will be assisted.

Officials are also meeting with banks to discuss the potential for future working capital support, including in the form of loan guarantees for businesses that face temporary credit constraints.

Robertson said preliminary forecasts indicate GDP growth for the year to March 2021 is expected to be -1% with the package. Without the package, it would’ve been -3%.

Robertson said New Zealand’s net core Crown debt is expected to breach the 15% to 25% of GDP target range in the near-term. Debt to GDP was 19.5% at the latest reading. Robertson noted his Budget Responsibility Rules have a caveat for a "major economic shock or crisis".

He warned New Zealand should prepare for a number of budget deficits, with Budget 2020 being recast as a "recovery budget".

“This is the rainy day that we have been planning for,” Robertson said.

“Any measures the Government takes must be timely, fiscally sustainable, targeted to those who need it, and proportionate to the level of economic shock…

“Today’s economic package is all about cashflow and confidence.”

The forecast 2019/20 New Zealand Government Bond (NZGB) programme is now set $3 billion higher than forecast at the Half Year Economic and Fiscal Update, at $13 billion. 

$7.5 billion of bonds have already been issued in the fiscal year to date. The forecast borrowing programmes for subsequent years are currently unchanged.

However, Treasury expects increases to programmes for future years will be necessary. It will provide updated forecasts alongside Budget 2020, to be released on May 14.

Here is a summary of the package:

Wage subsidies

The wage subsidies will be available for businesses in all sectors and all regions that can show a 30 per cent decline in revenue for any month between January and June 2020 compared to the year before (including projected revenue). If eligible, employers would be paid $585.80 per week for full time staff, and $350 for part time. Payments are capped at $150,000 per business. They will be paid in a lump sum. The support will be available for twelve weeks with applications open today. Businesses must have taken active steps to mitigate the impact of COVID-19 (eg. engaged with their bank) and signed a declaration form to that effect. Estimated total cost: $5.1 billion

COVID-19 leave and self-isolation support

The COVID-19 leave payment scheme will provide support (through employers/to sole traders and the self employed) for those people unable to work because they are in self-isolation, are sick with COVID-19 or caring for dependents who are in either of these situations. The payments will be equal to the rate of the wage subsidy scheme but available for a maximum of eight weeks. Employers will be expected to meet all of their sick leave and other employment expectations. Estimated total cost: $126 million

Income support package

This package includes:

- A $25 per week increase for all main benefits from April 1 2020. MSD estimates that this will increase the incomes of approximately 350,000 low income families. This will also help as more people who have previously been in work are likely to need income support in the coming months, and act as a stimulus.

- The Winter Energy Payment for 2020 will be doubled to $1400 for couples and $900 for single people. It is estimated that around 850,000 recipients will benefit from this change. Once we include the partners of recipients, more than one million people are expected to benefit.

- Removing the hours test from the In Work Tax Credit to assist those who may face variable hours.

Estimated total cost: $2.8 billion

Redeployment package

$100 million has been allocated to support worker redeployment. The Tairāwhiti region will be the first to receive assistance, with the package to be agreed by COVID-19 Cabinet Committee on Wednesday. 

Fewer small businesses having to pay provisional tax

From April 1 2020 the threshold for provisional tax will lift from $2,500 to $5,000. This measure will reduce cashflow pressure and compliance costs for small taxpayers by allowing roughly 95,000 businesses to defer their tax payments. Estimated total cost: $4 million.

Reinstatement of depreciation deductions for commercial and industrial buildings

A reintroduction of depreciation deductions for commercial and industrial buildings will encourage business investment in the recovery phase and support productivity. It will support business confidence, continuity and recovery. Estimated total cost: $2.1 billion

Waiving interest on some late tax payments

Interest is usually payable by taxpayers when they pay their tax late. The Commissioner of Inland Revenue will be given a time-limited discretion to remit interest if a taxpayer’s ability to make a tax payment on time has been significantly adversely affected by the COVID-19 outbreak. This measure will provide targeted relief to directly affected taxpayers facing cashflow pressures and apply for all tax payments due on or after 14 February 2020.

Immediate deductions for low value assets

Immediate expensing allows businesses to fully deduct the cost of low-cost assets when they are purchased, with the threshold for the write-off currently at $500. We are putting in place a temporary increase in the threshold to $5,000 for one year, reverting to $1,000 in the longer term (still higher than the current $500 threshold), which will reduce compliance costs for businesses. It will also have the side-benefit of stimulating business purchases. Estimated total cost: $667 million.

Support for large or complex businesses

Some businesses may fall outside the scope of the proposed business and employee support package (including working capital support), such as large or complex businesses. Officials have been asked to develop options so the Government can support larger businesses that have been materially impacted by COVID-19, where other avenues for support are not available, and the businesses are commercially viable over the longer-term. Any support would seek to mitigate the economic impact as adjustment occurs.

Working capital support for small and medium sized businesses

Officials are meeting with banks to discuss the potential for future working capital support, including in the form of loan guarantees for businesses that face temporary credit constraints.

Aviation Sector

The COVID-19 Cabinet Committee will discuss a package of measures to support the aviation sector and the protection of supply chains. This does not include any Government support for Air New Zealand. The estimated cost of this package is $600 million.

Measures already taken:

- Expanded Regional Business Partner Programme ($4m)

- MSD rapid response teams in regions hit hardest

- Removed benefit stand-down periods

BusinessNZ CEO Kirk Hope said the package will "substantially help businesses keep operating through the period of the coronavirus outbreak".

He said the wage support and tax measures were well-focused on key areas of need.

The Council of Trade Unions president Richard Wagstaff said: "This package provides an immediate boost to get through these challenging times.

"Ensuring that working kiwis, including those working as contractors or casuals, are financially supported so that they can self-isolate and take sick leave, is tremendously important. Employers have a pivotal role to play in responding to the impacts of COVID-19 and slowing down the spread. The government is doing its bit - now business and employers must do theirs." 

Here is National's response: 

The economic package released today by Labour, the Greens and NZ First puts money in the pockets of beneficiaries faster than it does most businesses, Leader of the Opposition Simon Bridges says.

“While we support the significant wage subsidy package, it is not immediate enough. Businesses and workers need relief now. Only about half of the total spending will actually go out the door in the next few months. The remainder will be spent slowly over the next four years.

“I am also concerned about how businesses with more than 21 full time staff will cope, with wage subsidy payments capped at $150,000.

“This package should be about keeping people in work. Instead, it will put money in the hands of beneficiaries faster than businesses who are doing it tough.

“National would have devoted more of the $12 billion package to urgent support for businesses in the next two to three months, to save jobs.  

“We also support the investment in increasing the Government’s health response however we would question why funds for ensuring New Zealand has sufficient medicines and facemasks aren’t being spent right now.

“Business depreciation changes are welcome but they do not go far enough, soon enough. The focus should be on accelerating business investment in the short-to-medium term and a much more significant instant asset write-off scheme.

“It is disappointing there is no announcement on deferring the minimum wage increase. We continue to urge the Government to put off the increase for at least six months.

“There is also no sign the Government is bringing forward major infrastructure projects.  Only 12 per cent of the Government’s $12 billion infrastructure package will actually be spent before the end of the 2021 financial year. That’s not fast enough.

“The Government should have also done the work on assuring banks have the confidence to continue lending to small-to-medium sized businesses, such as through a guarantee scheme implemented in the United Kingdom.

“We are heading into a deep recession, the Government needs to rise to the occasion. We acknowledge this plan and the support it will provide to some but New Zealanders will left asking for more.

“National would focus on keeping people in jobs, keeping businesses afloat and restoring business confidence.”

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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198 Comments

cue comments about missing a UBI opportunity

Soon it'll be just a matter of colouring in a few gaps to make it universal.

the key difference being that a UBI would be simplicity itself to implement and maintain whereas administrating a dozen different benefits and making sure only the 'qualifying' recipients get them is not.

Employing plenty of new civil servants - that's what we need: more jobs. Of course we may need to bring in immigrants to do them similar to builders and fruit pickers and Auckland bus drivers.

No, exactly the opposite, the simplicity of UBI is supposed to remove civil servants and instead put the money towards the UBI payments themselves.

Incidentally my daughter has just had a kid and so she has stopped work for a year and filled in the application for WFF and accomodation allowance - with the required supporting evidence it was over fifty pages and last week every page was photocopied by a busy Winz staffer. Since her partner runs a small business with unpredictable demand at the best of times and with work weather dependant I expect her finances will change day to day irrespective of what appears to be a recession. What did you say about the administrative demands of a UBI?

She will also get the 'baby bonus'!

A lovely baby. But a universal child benefit would so much simpler and generally beneficial to society. It worked in the past.

I wouldn't disagree with you there.

We replaced that with importing people a wee while back.

Lapun. If she's struggling with completing MSD application forms she should get Winston Peters to help, he's apparently very skilled at quickly and accurately filling them in.

That was my initial thought, no support to keep consumers spending. My second was that AirNZ operate a near monopoly, I understand it's too Kiwi to fail but funding should include the requirement to split into two competing carriers.

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Either that or you nationalise it completely and set publically mandated goals based not-for-profit motives such as improving connections to the regions. My gut instinct is that the costs of capitalising two regionally operating competing airlines outweigh the efficiency benefits driven by Adam's invisible hand.

We'll be able to buy it back for Cheaps now. What was is sold at $1.80 per share from memory?

Air NZ will be fine. Cindy is giving them $150k.

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Did....did Labour just use Covid19 as an excuse to finally boost benefits in an election year after years of doing nothing? I'm not seeing anything here for mortgage holders.

Look at us, we're acting decisively in a time of crisis! (we're enacting recommendations from a report that we've been sitting on for literally months).

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G V
Is the OCR cut already not a benefit to mortgage holders?

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So far, not much. Floating rates have come down, yes, but who was floating when fixed rates were so much lower?

Is it? How many mortgages are on floating? Fixed mortgages will need to be broken if rates do actually go down. That costs money. The OCR is purely theoretical to everyone else, and totally meaningless if people start getting laid off.

And I haven't seen that fixed rates have moved down...

Tell us about what's happened to servicing costs and house prices since the RBNZ started relentlessly pushing the OCR down. Who benefited most?

People who had put off buying houses for years because prices had spiraled out of control and it took years to get a deposit together, who are now facing paying those mortgages on fewer incomes per household, as the values of those houses start to drop?

Not everyone is a monopoly-playing hotel-building property investor. Some of us actually just need a place to live.

Agree that it was a bad idea to blow property bubbles with cheap money. It benefited those who had mortgages to pay or portfolios to grow, but not those coming in or further down the road.

Correct. I left buying a house as late as I could if I wanted a chance to start a family. Now I'm faced with a rapidly devaluing asset, a fixed mortgage I can't break, and if I had the resources to refinance, the fixed rates on offer haven't really moved at all. Throw the spectre of probable redundancy for one/both of us and the frustrations at this package become obvious.

The package, and not the orthodoxy and attitude of politicians and central bank governors over the last 20 years?

The package, and not the orthodoxy and attitude of politicians and central bank governors over the last 20 years?

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Well. A windfall for employers.
Exactly as predicted.

And for some reason beneficiaries..whaaat?

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Beneficiaries are quite likely to spend what they're given, hence a boost to overall demand.

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That's right. It's hard to deny that beneficiary spending tends to be a greater boost to our local economy. They are the least likely to line the pockets of foreign banks with large mortgages, go on overseas trips to Bali or buy an overpriced block of handcrafted cheese made in Western Europe.

You have that a bit wrong.
Increasing benefits results in an increase in willingness to pay for necessity goods. That means it capatalises directly into things such as rent. Not exactly the stimulation of demand we need.

Or power bills...This is going to be a pretty rough winter for anyone not getting the regardless-of-need power bonus.

A double whammy now global warming will be slowing down. I try to do my bit driving the car around the block a couple of times a day but I cannot replace the aviation and cruise ship downturn on my own:(

Might not be so bad if renters had warm, dry homes, I guess.

There's also likely to be more beneficiaries....

Yes, I wondered whether their costing for that increase also assumed an increase in numbers. And if so, what they see the unemployment rate going to in the next three months, for example.

Yeah.
So thinking ahead it is not just for existing beneficiaries whom some call ' bludgers' but also for the thousands who lose jobs in coming months.

Am also wondering whether this includes those receiving the Pension benefit. Not clear. They'll have had their income cut by the OCR drop so it may be they get a wee bit back on the taxpayer.

No, the $25pw extra is not applied to super.

Thanks

maybe -- but least likely to be effected financially by the virus -- once again if you sit on your ass do nothing to contribute to society then you will be rewarded for it

So long as landlords keep their sticky fingers off it

Reinstatement of depreciation deductions for commercial and industrial buildings

A reintroduction of depreciation deductions for commercial and industrial buildings will encourage business investment in the recovery phase and support productivity. It will support business confidence, continuity and recovery. Estimated total cost: $2.1 billion

So I pay a lease on a commercial building, is the intention that the trickle down effect takes place and I gain some of this benefit ? Or am I completely missing the point.

encourage business investment -- Really what planet are they on --- what business is goign to be investing heavily at this point - -unless its hand sanitiser masks and health -- OCR at 0 5 or 10% make no odds today -- virtually nobody will be investing until there is a much much clearer picture of the scale and time frame for this

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Reinstating depreciation on buildings? Of course, we can't leave property investors out in the cold!

Yes, when business fails then property owners will have reduced income.....cue depreciation

Why no gst or income tax cuts??

Can't cut tax, as that funds the government and pays for the measures......

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Must protect the Wellington bureaucracy at all costs. Given they've just spent everyone else's infrastructure money for the next few years in one hit...

Cutting both gst and income tax would support consumer spending and help keep those in service industries afloat. The government should be borrowing for these circumstances, not making the taxpayer foot the bill

Who do you think repays the money the Government borrows?

The taxpayer. After the crisis is managed. Not during

I don't want to pay for tax cuts for the rich. Better to target support to those suffering from downturn (e.g. those with no work and beneficiaries) rather than a tax grab for the rich.

a gst and income tax cut would help all wage earning brackets. As for beneficiaries, how exactly do they suffer during a downturn? they don't have a job to lose?

Don't forget that many who do have a job to lose will become beneficiaries.

Sorry, to clarify. By beneficiaries I meant those already unemployed, not those who are about to be

A rose is a rose is a rose.

k.

More costs as they try and boost their resistance e.g. higher electricity costs to maintain a warm home as well as more nutritious meals and possible inflation on essentials as people begin to hoard e.g. toilet paper and hand sanitiser.

So these costs you speak of don't affect those not on the benefit? Interesting please do tell me more

Beneficiaries have less disposal income to deal with those costs. Wealthy don't need to sacrifice anything (well maybe cut their lattes from 3 to 2 a day) as already have warm home, high protein diet and nutritious diet. Rich are obviously more equipped to handle a pandemic.

You missed the majority who fall in between and have the most at stake

If someone is employed and earning less then they would be paid on a benefit they can go to WINZ and get a benefit at a reduced rate to account for their salary. You appear to be saying there are a lot of people who are not on a benefit but receive less money than those on a benefit. Where are you getting these figures from (link please)?

You appear to be a poor interpreter. I was asking where in your comment in the consideration for the majority aka the middle class. I can tell you dislike rich people but what about the working class

Try talking clearer. Are you saying the middle/working class earn less than beneficiaries?

From 1 April minimum wage of $18.90 will give a 40 hour a week employee $756/wk. Average job seeker support between $300 to $400 a week including accommodation supplement.

What is your definition of middle class income per week (i'm not a professional mind reader/"interpreter"). Who are these "middle class" you are talking about who are poorer than beneficiaries?

Maybe you have dementia. I never said they were poorer. I asked you are the middle income earners not buying the same necessities that beneficiaries also buy and therefore subject to any price changes?

Now you're just being a clown.

Of course everyone is subject to the same price changes, the point is that beneficiaries have less ability to meet these increased costs hence the need for the $25 week top up. Do you agree it would be harder for beneficiaries compared with wage earners to buy these necessities (as they are poorer)? If not why not?

Agreed CPI inflation affects all people. For the most part, yes. However, I don't see how your argument against gst and income tax provides any relief for wage earners who are about to get left high and dry

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.. because our PM is a socialist. She wants to redistribute your money.

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All animals are equal, but some animals more equal than others

Compare the pure and shining meritocracy that is NZ Business! As true capitalists we should shun these squalid payments on principle; we took the risk - let us reap the rewards!

I think this is an instance where good businesses can just as easily fail as bad ones. This isn’t the capitalist shakeout of bad businesses that would generally occur with a downturn due to excesses coming home to roost.

NO! we should privatise profit and socialise loss, didn't you know?

Many define themselves as pure capitalists preaching ‘we make our own luck’ etc etc, until it turns to custard and they need the state.

Because they're philosophical frauds. Rules for thee, not for me (as they love to say about others).

What we're seeing is that everyone is a socialist in a recession.

The Restaurant Association was one of the first on the block demanding socialism for "mom and pop" businesses. Then we have property investors with an expectation and entitlement that they'll be protected because they're too important to fail.

Landlords in the office, already increasing their rents. Government needs to step in and legislate against this price gouging. But alas, this is just regarded as fair capitalism.

Going to be a few empty properties in Queenstown which will bring down rent costs.

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Never liked Simon Bridges, but he is tearing Grant up right now and I can't disagree with him.

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Can't stand him. He's 100% right.

My level of "can't-stand-him" included turning off the feed. What'd he say?

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Priorities all wrong.

$12.1b injection, but only $0.5b of that goes to healthcare. That's not enough to cover the existing deficit in the DHBs, let alone support them with the outbreak.

Allowance for businesses is capped, only enough for 21 employees and only for 12 weeks. What about the tourism operator in Tauranga with 40 employees? He's ruined. Let alone any medium or large business. And this will affect us for a lot longer than 12 weeks, so falls completely short in every respect.

Allowance for beneficiaries is fine, but what about everyone else? Where is the support for middle income earners. Where is the additional infrastructure spend, fiscal impulse etc.

Tourism operators are highly unlikely to keep staff on. My guess is tourism will be the SME industry contributing the most to unemployment statistics. The immediate increase to unemployment benefits provides some relief for these impending redundancies. Same as the changes to the in-work tax credit, as perhaps some will remain but their hours will be substantially reduced.

It really is now over to the tourism industry collective to get together and brainstorm a number of scenarios for getting through this without massive business liquidations. They ought to rally members and start a national planning discussion.

Banks, as per Orr's suggestion, will sort the wheat from the chaff. Many, many 'tourism' ventures are little more than an expensive and short-lived adrenaline rush. I'd incline more to the notion that the masses will figure out how little much of this is really needed, and that the banks will execute (double entrendre intended) accordingly.

Any costing of a National alternative package or just throwing rocks at Labour's?

Well, labour did set the example during their 9 years in opposition.

They're all a bunch of Muppets - Red, blue, green, black, yellow...

Ximon has a plan, the CCP should have it to him by the morning!

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> Payments are capped at $150,000 per business.
> $25 benefits increase.

What a joke. Bring on the election.

They were discussing postponing the election this morning.

What "they"?

Andrew Geddis, the law professor from Otago Uni I believe. They interviewed him on radio nz this morning to talk about whether it was possible, and instances where we have postponed an election previously.

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There is no denying that the package is large dollar wise. But I think it has missed the target for what they could have achieved. Most of the changes appear to be tinkering with tax which is hardly going to save a company with zero revenue due to Covid.

My thoughts:

Covid-19 leave payment
Rather than a wage subsidy my preference would have been to provide a Government paid Covid leave directly to the employee (Similar to maternity leave). Company signs off you are on Covid leave/self isolation. Doesn't have to pay you, Govt pays min wage per contracted hour i.e. max payment of 40*$18.90=$756 . Cap it at 8 weeks per person.

This would not only remove the pressure from companies to pay wages, but also employees as they wouldn't have to continue working if unable to.

It would also provide future cover should schools shut down.

Student Loan holiday
I think they could have rolled out a mass student loan holiday. i.e. no compulsory deductions for 12 months. A lot of workers would have got an immediate 10% take home pay increase. A lot more stimulating to the economy than $25 to beneficiaries.

Bank deposit Guarantee
An immediate Bank deposit Guarantee should have been implemented. A lot of people about to lose jobs. They shouldn't lose their savings as well.

They have something along the lines of the COVID-19 leave payment - as above.

Agree student loan holiday, but of course if you lose your job you don't get that benefit anyway. Still, hope it is in the May Budget decisions.

Deposit guarantee - yep legislation and implementation should be fast tracked through Parliament.

Yes, they hint towards the payment. But it appears more to cover non-employees.

I think a straight payment could have been used for all, Employees, contractors, etc... Potentially even just make it universal if the need arose. i.e. everyone gets it if they just go into a nationwide shutdown.

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sigh..sorry you lost your job that was bringing in 1k a week, but good news is we just increased the benefit by $25, hope you don't have trouble paying your rent while trying get a new job. Most SMEs will sink before they can get through the amount of red tape needed to get there hands on this.

If they can get their hands on $150,000 will that really change anything? Jacinda is pissing in the wind. $25 for beneficiaries to buy more bog roll and cigs. Wonderful.

That's a bit harsh on pensioners.

Why not use ACC? Treat those that are infected by Coronavirus as an "accident". ACC is very well funded and the infrastructure is already in place. ACC pays the salary until recovery.

Interesting thought. But then how many people who test positive are largely asymptomatic. So they really only need to self-isolate for a fortnight and the present package (in additional to standard sick leave entitlements) looks to support that time off work issue. The number of wage/salary earners who get hospitalised for long periods is probably going to be quite low. Most hospitalisations will be elderly/retired folks.

The package does not support time off work. The payments are very limited. ACC will pay to a much higher cap (up to $120k per annum or thereabouts I think). The machinery is already in place to handle this, rather than introducing new funding and bureaucracy. It won't happen, it's too "out-of-the-box".

Indeed ACC at 80% of wage with that cap is a marvelous system. But, it is funded by contributions and subsequent investments - hence - affordable.

We could never fund it purely out of tax receipts. We can't even fund a minimum income UBI out of tax receipts (or so we are told).

Not to be picky... asymptomatic is a word many people dont understand. I was surprised when someone asked me today. So I later asked someone else and they thought it meant the opposite. The commenters on interest are all intelligent enough but if people dont understand you then you're not getting your message across.

Benefits increase. Lol. Good for ciggies and booze sellers, for sure. And for junk food retailers too.

And for suppliers whose products are delivered orally, nasally, or needle-ily....

I expect the increase is designed for the raft of new beneficiaries likely to emerge over the coming months, as more people lose their jobs. Try and help them keep their houses/mortgages, to fight against a house price crash.

Us members of the precariat sink further under the radar.

I make my living as a self-employed supplier/contractor to sectors that are likely to be shut down temporarily leaving me with nothing. One of my customers contacted me today to cancel a supply contract because her business is being shut down temporarily tomorrow. Whether she will restart one day is anyone's guess.

Can't see anything in this package directed at people in my position. Better get the spade out and start digging the garden. Self-sufficiency will be my only option.

And, as I said in another comment, I don't fancy having to work through MSD for assistance.

You wouldn't be one of the 'skilled workers' that NZ needed, would you?

The message from this Government appears to be that you should be going on welfare. You would even get the $25 increase per week...
why wasting money on beneficiaries ? In this emergency, it is workers like you in need of support, not beneficiaries, whose contribution to the the economy is nil (apart from the spending of the benefit).

I have never tried it but I think most self-employed people will tell you that it is heartbreaking trying to get your entitlements out of the government (notwithstanding the GST, income tax, FBT, ACC levies etc they take off you using their draconian powers).

The upside is that this situation could age me prematurely so I might qualify for super and get a dream run through MSD.

You make it sound like 'beneficiary' and 'worker' are entirely separate categories that people never move between. But in reality the vast majority of beneficiaries were workers and will be again, and in the next few months a significant number of workers will probably become beneficiaries. Spending of benefits is a contribution to the economy, and making sure that workers who lose their jobs will receive a level of benefits that (hopefully) won't immediately plunge them into dire poverty is doing something for workers.

Best thing the government can do for self-employed contractors (and there are a lot of you out there) is try to keep your customer base spending. If work dries up completely - unemployment benefit is the only option. And given this crisis, many previous well off/comfortable people will have a good lesson in empathy. Perhaps Jacinda should change from be kind, to be humble.

Kate, the Guardian had a good piece a few days ago (long since lost in the tsunami of C19 coverage) on how governments have four policy goals related to pandemic. I can't remember what they were but they did say that at least two of them, economic survival and containment of spread, were more or less mutually exclusive. So the UK are going down the money is more important than people route while other countries have bit the bullet.

And we see this policy dilemma here. On the one hand our government are trying to prop up the economy but in a patchwork manner. But they are also trying to contain the spread. My customer has a shop in a permanent covered market. To my mind not much different to any mall or supermarket. But, because of yesterday's advice to not hold events attracting 500 or more people, it sounds like that market is closing. In my particular case the government can't prop up the sources of my revenue without violating their other policies.

I'm big enough and ugly enough to see this one out but the point is that, with decisions being made in haste there is going to be "a swing and a miss" fairly frequently. And there are a lot of people who will struggle notwithstanding this support package.

Yep, many in the world will find themselves on "struggle street".

With the closed marketplace - surely the operators would just restrict entry to some number of individuals at a time? 500 is too big a number anyway. Even 100 is pushing the envelop in a confined, indoor space.

The problem with hospitality (and, let's face it, these covered "markets" are little more than fancy food halls) is that a majority of businesses make all their money in brief, crowded rushes. From what I understand my customer makes almost all her revenue 11am to 1pm. Start restricting entry and you kill the business anyway. Also my customer's business is a few months old so she can't prove decline in revenues so won't qualify for any support.

Somewhere else I said I preferred helicopter money then we wouldn't have all these stupid arguments about who qualifies and who doesn't, what's fair and not fair.

I stand corrected. It turns out that when we said "wage-earners" we really meant self-employed and contractors.

Still put money on the media being full within a fortnight of stories of applicants being denied in droves by MSD.

Not that major companies where targeted but muted reaction on the NZX. Lots for SMEs but little that will make your average consumer keep spending. I suspect we will continue on the trajectory we where on previously until the next round is announced.

The only thing that I could have used was the asset depreciation write off but everything has been upgraded over the past two years with no plan on spending until much later.

Doesn't really seem to help my business but I'm not in the same risky position as many others.

The forecast 2019/20 New Zealand Government Bond (NZGB) programme is now set $3 billion higher than forecast at the Half Year Economic and Fiscal Update, at $13 billion.

The ideal alternative funding source would also be available on demand by being created ex nihilo domestically, without the need for any capital by the lenders.

Should such a debt instrument or funding source exist, it would be the most attractive source for the sovereign borrowers concerned, and not utilising it would be negligent. To find it, one could ask the debt origination experts at a leading international bond investment bank whether it could be designed. But securities firms could hardly expect to earn money on such an instrument. Fortunately, they will not be needed to design such an instrument: It already exists.

It is one of the oldest and simplest debt ‘products’ in existence: a bank loan contract. In our modern monetary system, which is dominated by digital money transactions, the total amount of digital money is controlled by banks and their bank credit creation (Werner, 2005, Ryan-Collins et al., 2012, Bank of England, 2014a, Bank of England, 2014b). For nominal GDP to grow, more (GDP-based) transactions must take place. This requires a larger amount of money to change hands to pay for this larger amount of transactions. The main way in our debt-based monetary system for more money to be used for transactions is for banks to create more bank credit. In other words, banks need to find borrowers willing and able to borrow from them, so that they can purchase the promissory notes issued by these borrowers. Such promissory notes can be tradable (corporate bonds for instance) or non-tradable (such as standard loan contracts).

Past approaches to debt management have focused on a narrow set of funding tools and debt restructuring, including complex derivative instruments. But the simplest, most plain-vanilla of debt instruments, the bank loan contract, has been unduly neglected, despite superior characteristics.

Enhanced Debt Management suggests that governments of crisis-affected countries should immediately halt the issuance of new government bonds and also the borrowing from the Troika, and instead raise the public sector borrowing requirement by entering into loan contracts from the banks in their country. Since aggregate private debt is much larger than government debt, and banks are the single biggest providers of the former, they are also able to provide for all the funding needs of the government. Banks used to be involved in direct lending to governments, but as the IMF/World Bank manual underlines, this has been actively discouraged for the past twenty years or so.20 Link - 4. A better option: Enhanced Debt Management

A swing and a miss!

If a business experiences "a 30 per cent decline in revenue for any month between January and June 2020 compared to the year before (including projected revenue)." then this opens the door to a Raft of Rorts: just delay a chunk of x month billings to Month x+1 or 2, and Apply. Bit the same as all those end-of-year sales conducted on June 38th, but in reverse.

The 'reinstatement' of depreciation deductions on commercial and industrial buildings is an acknowledgement that, just perhaps, they should never have been removed in the first place.....

Counter to that: If a business actually experiences a 30% hit in revenue (not profit, revenue) then a $1500 subsidy per head won't be the difference between staying open and just laying everyone off. The businesses who take this route aren't going to wait until round 2.

Economics is not important today. You need to deal with saving lives today!

Over 200,000 NZers will die, over 1 in 20 of those reading this. Action must be taken right now.

The rate of spread means that it will infect all unisolated NZers in just 60 days but it can be defeated by isolation and shutdown. Why are we going to wait until thousands full the morgues before the inevitable action is taken.

It is already here in the hoards that surged in over the last few days. Statistically by the time the first case of community transmission with serious symptoms is identified, 256 cases could be circulating with mild symptoms and early stages of more serious disease.

It will explode like a bomb. Just as in Europe. We don't have days to wait and dither.

Please for the love of God, understand the maths.

Money is important. People who are sick and have no money to pay the mortgage will go to work and infect others.

Yeah, it was brilliant to let the hoards surge in instead of instituting immediately without warning. But they were mostly Kiwis, so it was AOK.

Yes, perhaps we will have more practical prevention measures announced soon. Today was all about fiscal stimulus. Tomorrow might be about community testing and self-isolation initiatives. I noticed one rest home chain already put their facilities in lockdown. That ought to be mandated.

Except there is 0 evidence of community spread in NZ, which is what is required for NZ to be "just like europe". If we had any community spread starting 3-4 or more weeks ago, it would be evident by now.

No evidence of community spread - yet. But all the countries that now have lots of cases went through a period where there were few cases and no evidence of community spread before the number of people infected increased. What is so special about NZ to make you think that the same thing won't happen here?

1. If community spread had been happening weeks ago, it is highly likely there'd be some signs of it showing up already.
2. Any community spread that appears in the next week or two will be doing so in an environment where anyone who is suspicious that they have coronavirus will be demanding to be tested and at the least will self-isolate, preventing it from spreading any further.
3. Medical personnel will quickly respond to any positive cases and carry out full contact tracing, and those people will all self-isolate.
4. Large gatherings are being cancelled which will drastically limit the ability of the virus to spread amongst a wide group of otherwise unconnected people.

When the virus was first spreading in Italy they were very blasé about it. We were weeks ago, too, but have apparently managed to avoid community spread happening weeks ago.

Fair enough. Do you really think we will be able to stop community spread happening at all though? That seems a bit unlikely to me, given that there is likely to be at least some degree of non compliance and that some people can spread the disease even when they have no symptoms. I hope you are right, but realistically I think the best we can do is slow it down.

Community spread WILL be happening.

Do the math.

Let's assume the natural uncontrolled transmission rate an average of 1 person infecting 3 others every 6 days. (Hence leading to case doubling effectively every 3 days. ie 1 case on day 0, 4 cases on day 6, 16 cases on day 12 etc). If 1 mild case was infected on day 0 (arriving in NZ shortly after being infected. Then on day 6 there are 3 new infections, statistically likely also all to be mild (assume none of the mild cases get picked up as no direct connection to travel), then on day 12 we have 12 new infections (16 total) statistically 1 of these will be serious and therefore it will be the first community transmission to get picked up BUT it won't be picked up until day at least 12 days after that infection ie day 24, hence there will already be 16x4x4 (ie 2^8) which is 256 cases of which 51 will be serious.

This could potentially happen in several places at once, hence there might be 100-200 serious cases turning up in days of each other, probably about 24 days after the first unknown case. The likelihood of our first case of this kind of seeding was sometime in the past 10 days, so in 14 maybe longer (if incubation is towards the longer end for the initial cases) we will have 100 odd cases turning up.

This has happened in nearly every country so far.

We need to lock down now as by the time they react to the first community spread that is picked up, a few more days will pass and 256 will turn to 1032 case and we will be exactly where Europe and USA were a few days ago.

We are pretty much screwed unless Ardern acts now. The experts now this look how grim Prof Michael Baker looked on tv, the experts know this and say we must act now, only stupidity and fears of overreacting and financial cost considerations are stopping it.

Chris J, you say
"Over 200,000 NZers will die, over 1 in 20 of those reading this. Action must be taken right now."

I'm afraid this is incorrect, 100% of NZers will die and there is nothing anyone can do, such is life.

Reckon they should green light some more large infrastructure spends. Good time to redirect spare workers into infrastructure that we are behind on, hospital and schools, additional roading and other civil projects. Working and earning is a better outcome than free money and benefits.

With all the "tickets" required these days, redirecting mass labour into Construction projects is never going to happen.

Also those projects are too slow to actually get to a shovel ready stage.

Too many consultants clipping tickets

Consultants are workers too, well sort of, perhaps, maybe a little.

Wash your mouth out. Workers are accountable for their actions

I agree that would be sensible - but 2020's are not the 1950's. The spool up time for big projects is immense these days, and few have any sort of practical hands on skills (takes months o become competent or even not dangerous in a lot of construction roles) - and with both partners in most relationships working there is a huge lack of mobility in the workforce as well.

It's a mess, through nobodies fault (excepting Chinese govt).

The sad truth is that these days we would spend more on consultants and environment court hearings than a large project would of cost once upon a time. Everyone always bagged the MOW for inefficiency etc etc, but NZ needs to be thankful that most of our really significant infrastructure happened under their reign. The private sector can’t deliver a 5 level hotel on time at a challenging location like Christchurch airport!

How much will it cost to administer wage subsidies? How much of the wage subsidies will be going to employers employing people on temporary work visas (i.e. much of hospitality and tourism sector) who will continue to send much of the money offshore?

FFS. Millions of dollars are already being distributed to independently wealthy superannuants via the winter energy payments. Now they are going to double it. At least they can't spend it on cruises and overseas trips for a while.

Does make you think super (and the winter energy payment) might be means tested soon.

This new measure will be fertile ground for rorting the government/taxpayer.
How are they going to choose who gets what?
Is Sky City going to plead that its international high-rollers can't access the country, and thus put their hand out for compensation?
Are all businesses connected with tourism going to insist on receiving financial compensation to the extent that brings them up to par with last year's balance sheet?
Is every one of the hundreds of ethnic restaurants that have sprouted up in the last few years going to claim full compensation?
The list goes on and on.

It would be remiss of any company not to plead for free money.

Throwing money at timber is probably a lost cause. Log prices where falling long prior to Corona virus. The latter has just expedited the trend. Interest.co.nz actually does a great job of tracking this: https://www.interest.co.nz/rural-news/103870/scott-downs-reports-very-di...

"This the rainy day that we have been planning for."

There's no doubting Robertson's mastery of the understatement.

This compensation package will have to be transparent, won't it?

Surely the taxpayer will want to know how much each business receives: from Air NZ, to Wingwong's Chinese Takeaways, to Raj Singh's Curryhouse, to Freddy Slick's Cheapest Cars, to Nigel Enslope-Jones's Investment Fund for Professionals, to Megan and Diana's Incredible Weight-loss Clinic.

This is where all the journalists that contribute (very good) articles to the Interest.co.nz blog should be intensely concentrating on over the months ahead. They need to be on their mettle here.

What happens if I have a part time admin assistant who makes $200 a week (for 10 hrs of admin) do I still get $350 per week for her?

The wage subsidy things looks too complicated, too loosely targeted and either excessive or inadequate. What is needed is temporary cover unemployment regime. If you lose your job because of Corona virus, government will pay a % of your income (e.g. 100% of minimum wage and reducing on a scale as it goes up, income is salary and wages income as per your IRD return over the year ended 31 Dec 2019) for a certain period of time. This will help the individuals. This also helps the businesses as they can cut their wages without feeling guilty.

there again, no one appears to have thought this out in advance, no plan, yet the risk has been around since Adam was a boy.

Peanuts!

That's just the unspent budget surplus from last year. Rude.

Once again, middle New Zealand is asked to pick up the bill.

Grant Robertson saying "this is what we saved for" is a bad joke. No Grant, this is what the two last National governments saved for, while you and your colleagues screamed at them all the way, and then went on a drunken spending spree the moment you got power.

We're not being asked, we're being told

.

OECD average GDP borrowing 75% plus.
NZ 20%
pathetic hair shirt neo-liberal drivel and time it was gone

Uh, if we're going to go by the history of government budgets, don't Labour finance ministers have significantly more examples of reducing deficits / increasing surpluses than their National counterparts? (Not that it's fair to reward or blame governments for economic factors out of their control).

Rewriting history there, bud.

I think you will find the Last National did not seem to save anything. Debt climbed heavily under their term. The Labour and National governments previous look to have lowered debt. Please forgive if the info I used has been interpreted wrongly. https://tradingeconomics.com/new-zealand/government-debt

Utter tosh. The last two National governments borrowed heavily. When they came into power govt debt was around 10b and dropping. When they left it was 60b plus.

Agree with your first statement however, bonds will be bought, interest needs to be paid by the tax payer. That's the productive sector of NZ, which is currently being shat on. Answer? Asset and land taxes to relieve the burden on the productive economy.

put up the price of ciggis and booze and whamo they will get back the $25 a week

Don't they up the ciggies tax annually anyway?

Only if you give it to them. don't ciggies cost over $1 each now? Literally setting money on fire while reducing your life expectancy.

I guess there's no such thing as stupid questions?

Ya, just stupid people like Simon.

Want to see what we are up against?
Read best thing available:
Imperial-College-COVID19-NPI-modelling-16-03-2020

Critics, Beckett hated them.
Government has to make SOME decisions.
People who have chosen not to be up there in firing zone, do not and chose not to.
Sniping is petty and hypocritical

I hope people understand that the $12'100'000'000 doesn't appear out of thin air, it will be paid out of our taxes. I'm a hard arse capitalist and libertarian, I say no government help is best, let the weaker businesses fail, it'll make for a much stronger NZ. (FYI I own a Motel and Airbnb's, probably one of the worst affected industry)

Yvil

Like letting banks fail? Creating currency out of thin air? Nah that's capitalism for us and socialism for the banks..

That's ok.

I agree. It's government intervention of the wrong kind that got us into this mess. We clearly haven't learnt a thing from 08

Just rent them to housing nz for transition housing.

Neither has the money that's been shoveled to property investors via the RBNZ dropping trousers over the last decade appeared out of thin air, either. It's a taking of quality of life from the young and coming generations of NZers. Agree we should not have been doing this and propping up property and businesses that otherwise wouldn't have fared so well.

The "weaker businesses"..... when I look at your "Businesses" I wonder how many FTEs you employ, FTEs whom pay tax, spend income and create GST from thin air from the sale of their labour.
Businesses whom primarily sell the labour of humans will be affected heavily. As will the humans families.
These are businesses whom train, mentor and put up with the struggles of developing young work force entrants into productive citizens of the future.
I say bring on government intervention, intervention like charging fake businesses like Airbnb's and residential rental properties commercial property rates, insurance and landlord liabilities.

Yip let’s cancel all accommodation supplements and see if tenants or landlords scream the loudest

The package is directed to benefit individuals, keep employment going, help small businesses, and the beneficiaries & the elderly. I like it. Of course, more may be required if the crisis deepens. The Government has got the Budget in May to review and fix that. A good plan by the Finance Minister of a Government known for its empathy.

No word about stopping our runaway immigration. With the inevitable large rise in unemployment there is absolutely no excuse for any immigration.
We should also be hunting down all the over stayers also.
You can almost guarantee that this weak minded government will do nothing in this sector and we will be flooded with even more people escaping overseas economic stress so that they can exploit our generous social support.

Chris-M. A large number here on work visas are in tourism and hospo much of which will take months to recover, well beyond this wage support package. They aren't eligible for WFF so when savings are gone they'll either have to go underground or leave NZ.

Ximon has a plan, the CCP should email it overnight ready for the morning slot with Mr Hosking.

My daughter works in Wellington, what she does is a secret, but she tells me everyone is talking job losses.

She's a barista then.

Is she a clairvoyant?

Won't be a public servant then, if she's at risk of job loss.

no, she does something in govt. I only have a vague idea of what she does. Sometimes she works weekends.

Sounds like a call girl if you don't know what she does and she sometimes works weekends.

she studied international security and terrorism at uni in Scandinavia for a few years, so probably something along those lines.

I'm guessing she talks into a shoe :-).

well she just got shifted to a new position, which is very impressive for someone of 27.

is her name James and does she drive an Aston Martin?

no but her new job is going to be very stressful. She's more interested in sailing.

UBI is the end game for the central bank takeover. This way they can control every dollar and aspects of our lives..

So, when are the Big Banks going to announce their relief package to the customers and promise not to send profits out of the country ?

Haha that is good love it.

New Zealanders send $5 billion over to Australia via their banks each year: https://www.newshub.co.nz/home/money/2019/11/how-kiwis-are-sending-a-5-b...

That could be useful in NZ's economy. Maybe we shouldn't have pumped debt up so high.

Auckland Airport has cancelled the announced interim dividend.

Well I’ll be happy if I stay employed..but from a mortgage paying, tax paying young family it’s another kick to the nether regions. No fixed mortgage rate cuts passed on (so far) and the taxpayer footing the bill as always! The banks sending us all emails saying they are there for us!? Great tui add right there

Lets see, we have a major speculative debt driven bubble which has gone on for a decade or so, which is rapidly deflating after a little prick (corona virus) popped it. We find ourselves with zombie companies (companies just surviving on debt), lowering productivity (the only thing that drives long term improvement in living standards), overblown assets which shouldn't be an investment class (housing) and a population addicted to spending money they don't have (see household lending stats).

Answer to all these problems... MORE DEBT!

Brilliant.

Retirees are the last in line once again. When will this government understand that when things rerurn to normal an election will take place. The retirees take up 20% of the voting sector and will vote accordingly on election day.