The 2020 Great Economic Crisis rescue package - a tally of Government response measures announced
All of a sudden, a monumental economic crisis has befallen New Zealand as we prioritise fixing the COVID-19 virus health crisis.
Here is a list of what has happened on the economic front so far: (It is not intended to track the wider crisis matters, just the economic response)
(H/T to BNZ for the idea and some initial population of this list. Please contact us to update or correct this tally. We want it to be an accurate and up-to-date record.)
RBNZ slashes the OCR to 0.25% from 0.75%.
RBNZ dusts off its GFC Term Auction Facility providing banks term funding via collateralised loans out to 12 months.
Government announces $12.1 bln economic response package, the equivalent of around 4% of GDP. This includes:
- $500 mln for health,
- $5.1 bln in wage subsidies for affected businesses in all sectors and regions over 12 weeks with a $150,000 cap,
- $126 mln for COVID-19 leave and self-isolation support,
- $2.8 bln income support, including a permanent $25 per week benefit increase and a doubling of the Winter Energy Payment for 2020,
- $100 mln for redeployment,
- $2.8 bln in business tax changes to free up cashflow including provisional tax threshold lift, reinstatement of building depreciation and writing off interest on the late payment of tax,
- $600 mln initial aviation support.
Government closes border, effectively stopping all people travelling to NZ except for returning New Zealanders.
Government supports AirNZ with 24 month loan facilities of up to $900 mln.
Government introduces COVID alert system initially setting it at level 2.
RBNZ starts Large Scale Asset Purchase program up to $30 bln of Government debt.
Government lifts alert to level 3 and says will be at level 4 in 48 hours (essential lockdown except for essential services).
Government removes cap on wage subsidy scheme, injecting a further $4 bln over next 11 weeks and taking the total cost from $5.1 bln to $9.3 bln. (The $9.3 bln is an estimate, not a cap or a floor, with support there to meet the demand.)
Government freezes all rent increases for six months and looks to extend no-cause terminations.
Government gives detail on $600 mln aviation package with $270 mln to airports and airlines and up to $330 mln on ensuring capacity for high priority goods.
Government announces banks will provide a six month mortgage holiday for mortgage holders and SME businesses.
Government announces a $6.25 bln business finance scheme allowing for loans up to three years, with Government taking 80% of the credit risk and the banks carrying the remainder.
RBNZ lowers banks’ core funding ratio to 50% from 75%.
Government announces a $327 mln package for social services.
Government tweaks wage subsidy scheme with a cost estimate now between $8 bln and $12 bln, up from the original $5.1 bln.
RBNZ buys more government bonds, and starts 'repoing' corporate and asset-based securities to support liquidity in the corporate sector.
Treasury increases its 2019/2020 bond sales programme to $25 bln from $12 bln.
The Government has tasked the Infrastructure Industry Reference Group, to be headed by Crown Infrastructure Partners chairman Mark Binns, to put forward to Ministers projects from the private and public sector that are ‘shovel-ready’ or likely to be within six months.The reference group will be seeking out larger projects, with a value of over $10 million, which would have an immediate stimulatory effect on the construction industry, its workforce and the economy. These new projects will be in addition to and build on the Government’s $12 billion New Zealand Upgrade Programme and existing Provincial Growth Fund infrastructure investments.
Transport Minister Phil Twyford said advance payments will be made to transport construction industry contractors to retain the workforce and ensure it is ready to quickly gear up to build projects which will be vital to New Zealand’s COVID-19 economic recovery.
The Government says businesses can start applying to their banks for loans under the $6.25 bln Business Finance Guarantee Scheme. Businesses with annual revenue between $250,000 and $80 million can apply to their banks for loans up to $500,000, for up to three years.
RBNZ starts a Term Lending Facility, a new longer-term funding scheme for the banking system, in support of the Government’s Business Finance Guarantee Scheme to help promote lending to businesses.
RBNZ stops banks paying dividends until the crisis passes.
The Government signalled more business support measures. These include: Temporarily giving directors of companies facing significant liquidity problems because of COVID-19 a ‘safe harbour’ from insolvency duties under the Companies Act, enabling businesses affected by COVID-19 to place existing debts into hibernation until they are able to start trading normally again, allowing the use of electronic signatures where necessary due to COVID-19 restrictions, giving the Registrar of Companies the power to temporarily extend deadlines imposed on companies, incorporated societies, and charitable trusts and other entities under legislation, and giving temporary relief for entities that are unable to comply with requirements in their constitutions or rules because of COVID-19.
RBNZ increases its range of support measures by offering to purchase Local Government Funding Agency (LGFA) Bonds. It's described as a 'small scale' offer with no dollar figures put on it. The RBNZ says the offer is for liquidity management purposes and to support market functioning.
Finance Minister Grant Robertson says 1.073 million people, or 41% of those in employment as at December 2019 (the most recent labour market figures available), are being supported by the Government's wage subsidy. The Ministry of Social Development has to date paid $6.6 billion, which is equivalent to 2% of NZ's GDP pre-Covid-19.
Further to its announcement of 6 April, the Reserve Bank says it has added $3 billion of Local Government Funding Agency (LGFA) debt to its Large Scale Asset Purchase programme (LSAP). This represents approximately 30% of the total LGFA debt on issue, and takes the total size of the LSAP to $33 billion over 12 months.
Education Minister Chris Hipkins unveils $130 million-plus tertiary student support package.
A suite of measures announced to help small to medium sized businesses and also owners and tenants of commercial property. The measures include: $3.1 billion tax loss carry-back scheme (estimated cost over the next two years), $60 million estimated annual savings to business each year from changes to the tax loss continuity rules and $25 million in the next 12 months for further business consultancy support.
The Government introduced and passed under urgency legislation to implement the changes announced on April 30.
But, inadvertently the Government passed much more than was intended.
The Government gave more detail on the Small Business Cashflow Loan Scheme it had inadvertently passed into law earlier than intended the day before. The scheme will provide interest free loans for a year to small businesses impacted by the COVID-19 economic shock to support their immediate cashflow needs and meet fixed costs, with assistance of up to $100,000 to firms employing 50 or fewer full time equivalent employees.
The Government also announced a broadening of the rules around the Business Finance Guarantee Scheme.