Economic decisions as NZ readies for Alert Level 4 in COVID-19 fight

From the Ministers of Finance and Social Development:


The Government is announcing significant further support for the economy, workers and businesses as the country unites to prepare for Alert Level 4 in the fight against COVID-19.

Cabinet today agreed to remove the cap on the Government’s wage subsidy scheme, which will inject a further $4 billion into the economy over the next eleven weeks.

In addition:

  • The Government is expediting urgent work on new income support measures for all workers above and beyond the wage subsidy scheme, to be appropriate for how the economy will operate under Alert Level 4.
  • The Government, Reserve Bank and retail banks have agreed in principle to significant temporary support for mortgage holders and a business finance guarantee scheme for those impacted by COVID-19 as the country moves towards Alert Level 4. The details of this will be announced in the next few days.
  • Cabinet has agreed to freeze all rent increases and to look to extend no-cause terminations to protect people during this difficult time.

“We have a chance to beat this virus as we step up our public health response. We know this will have significant impacts on the economy, and we are doing what it takes in response to this rapidly changing situation,” Finance Minister Grant Robertson says.

“These significant measures – along with previous moves to raise benefits and tax changes to support cashflow – are focussed on cushioning the blow for workers and businesses as we respond to this unprecedented global crisis. As we have said before, we cannot guarantee to stop all job losses, but we are doing our best to cushion the blow.”

As this crisis evolves, we are moving rapidly to support New Zealanders.

Now that many New Zealanders may not be able to go in to work for the next few weeks, our priority is ensuring they continue to receive some form of income through this period.

All employers affected by COVID-19 will now be able to apply for the existing subsidy to support the wages of all of their workers.

The changes mean the forecast cost of the wage subsidy scheme is being lifted from $5.1 billion to $9.3 billion. This assumes 50% of businesses access the 12-week scheme.

“The $9.3 billion is an estimate, not a cap or a floor. This means the support will be there to meet the demand. We are doing what it takes to put support in place for workers and businesses.

“We can do this because New Zealand is one of the best-placed economies in the world to deal with COVID-19, due to our low Government debt and strong economic fundamentals going into this global crisis,” Grant Robertson said.

MSD will do its best to get payments out the door as quickly as possible, Minister for Social Development Carmel Sepuloni said.

“But we ask that people have patience and show a little kindness to staff there who are working as quickly as they possibly can. A payment system of this magnitude is unprecedented in New Zealand.”

Wage subsidy scheme – Cabinet decisions on 23 March:

A number of other important changes are being made to the scheme:

  • The previous $150,000 cap is being lifted, so that all employers can access the full payments to subsidise each of their workers’ salaries.
  • New businesses (eg. that are less than a year old) and high growth firms (eg. firms that have had significant increase in revenue) are also eligible. They need to demonstrate the revenue loss assessment against a similar time period, for example a 30% loss of income, attributable to COVID-19, in March 2020 compared to January 2020.
  • Self-employed people with variable monthly incomes are eligible if can demonstrate the revenue loss assessment against the previous year’s monthly average (eg. 30% loss of income attributable to COVID-19 comparing March 2020 to the average monthly income in the period March 2019 to March 2020).
  • The scheme does cover registered charities, non-governmental organisations, incorporated societies and post-settlement governance entities.

Other criteria still apply, including the 30% revenue reduction and for businesses, on their best endeavours, to maintain their named employees at 80% of their pre-COVID income. The same twelve-week period applies to the wage subsidy scheme. The new criteria will apply from midnight tonight.

Leave a comment

30 Comments

  1. Alan Wilkinson

     /  23rd March 2020

    Making it up as they go along. Probably delivery will be as fraught as the planning.

    Reply
    • Kitty Catkin

       /  23rd March 2020

      It’s people’s own money, of course.

      People forget that the government doesn’t have any money; it’s the people’s money.

      Reply
      • Duker

         /  23rd March 2020

        The Reserve Bank is creating $30 bill worth from today

        Reply
        • Kitty Catkin

           /  23rd March 2020

          Have they bought a printing set ?

          Reply
          • Blazer

             /  23rd March 2020

            economic illiterates do not understand the financial system and money creation.

            Reply
            • Duker

               /  23rd March 2020

              The Reserve Bank creates the longer term money supply, always has in NZ
              The clever way means the Reserve Banks borrowing doesn’t end up showing up on ‘governments core borrowing’ .
              RB is creating money for trading banks to lend and creating money for Government to spend
              It’s win win !
              The fun part is re doing this all again next year as the prospect of 20 old people dying from CV19 can’t be allowed to happen….out of the 31,000 who die here each year for all reasons, again most are elderly.

        • Alan Wilkinson

           /  23rd March 2020

          No, only over the next year. And the lost GDP say 30% will cost the country $100B that will never be recovered.

          Reply
          • Blazer

             /  23rd March 2020

            chump change….

            ‘But if you want to continue to be slaves of the banks and pay the cost of your own slavery, then let bankers continue to create money and control credit. ‘Josiah Stamp

            Reply
            • DaveK

               /  23rd March 2020

              “It’s so simple to be wise. Just think of something stupid to say and then don’t say it”

              Sam Levinson

    • Blazer

       /  23rd March 2020

      what is the default template for dealing with C19?

      Reply
  2. Kitty Catkin

     /  23rd March 2020

    It’s just playing Shove Ha’penny, shifting money around from one place to another.

    Reply
  3. Alan Wilkinson

     /  23rd March 2020

    The other side of the ledger:
    https://spectator.us/consider-costs-coronavirus/

    Reply
    • Kitty Catkin

       /  23rd March 2020

      I didn’t realise that three of the people who’d died in Italy had no existing conditions. Three out of 2000. That small detail hasn’t been publicised, and the 99% survival rate doesn’t get much publicity, either.

      People who are shut in and don’t have computers are likely to have a thin time if they can’t get out to buy groceries for four weeks; no pun intended.

      Reply
      • Duker

         /  23rd March 2020

        Roughly 100 people in NZ per year die from drowning in sea, lakes and rivers

        Will all swimming in open waters, recreational boating etc be banned from now on as well?

        Think of the lives saved …every year…men , women , children

        Reply
  4. David in aus

     /  23rd March 2020

    Over the top. Why not follow the South Korean example? Not sacrifice people’s livelihood. The response should be proportionate.

    Reply
    • David in aus

       /  23rd March 2020

      Perhaps, they have little confidence in their own abilities so they need do the extreme measures.

      Singapore is still running relatively normally, people working with mitigation measures. The are more densely populated than nz.

      Reply
  5. pythagoras

     /  23rd March 2020

    For once in his life, Mike Hosking is correct:
    https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12318998
    Good to see Simon Bridges and co also backing up the government and offering their support on the progression to Level 4.

    Given what has happened in other countries, only a complete ignoramus would oppose such a lockdown. Ironically, such doofuses are most likely to be old codgers, probably with shares that are now worthless or airbnbs that are now vacant, who would be the most likely to kick the bucket if Covid-19 really took off here … perhaps not such a bad outcome for the country, either.

    Reply
  6. duperez

     /  23rd March 2020

    We’re going into lockdown. Here’s why

    “All of this is happening despite the fact that we have just 102 cases of Covid-19 and all but two of them can be traced to overseas travel or other confirmed cases. Why?

    It could save tens of thousands of lives. Here’s how:

    Suppression needed, overseas figures show

    Overseas estimates in a paper from the Imperial College London found that taking no action to fight the virus could leave 250,000 dead in the United Kingdom and 2.2 million in the United States. Taking “mitigation” measures – known cases self-isolate, as do their families and all people over 70 self-quarantine – would only halve the death toll. But “suppression” measures, which would involve reducing physical contact to the bare minimum, working from home and closing schools, can cut the toll by 90 percent.”

    https://www.newsroom.co.nz/2020/03/23/1097159/were-going-into-lockdown-heres-why

    Reply
    • Duker

       /  24th March 2020

      Predictions like that are made with cascading worst case assumptions that are almost always incorrect.
      You dont have every worst case and there is the well known ‘experts predictions who are usually wrong’
      Its like Economics, barely ably to ‘predict the past’, let alone the future. Does Treasury here ever get their yearly prognostications right. Often they are badly off.

      And the weather forecast is famously incorrect often, only right when they ‘predict the same as yesterday’

      A new virus is completely unknown factor , they arent even sure about the method off spreading …is it micro droplets from sneezes and coughs or is it as were were told last week from touching surfaces contaminated by the spreader

      Reply
  7. oldlaker

     /  23rd March 2020

    Can anyone tell me whether incoming passengers from overseas are going to be quarantined from Wednesday evening?
    Surely we’re not shutting down almost the entire country and still letting people come in from overseas without strict quarantine?
    There was nothing in Ardern’s speech about it, and no one asked that question afaik. It will be the most stupendous stupidity if we are still importing disease…

    Reply
  8. Understand there is NO economy ahead if COVID-19 wipes a broad swath of consumers off the map, and sweeps away workforce resources through sustained illness and dealing with the fallout from deaths.

    Reply
  9. Duker

     /  24th March 2020

    What the virus has destroyed is the whole rationale for the National Party….well the bits where they cover up their crony capitalism.
    Cutting regulations and letting free enterprise have free reign when virtually everything is bankrolled by the government will seem quaint idea from a previous century..
    What has happened is Bridges will have to sound exactly like Micheal Cullen ( who saved our bacon with the Cullen Fund)

    Reply
    • That’s the fund that had lost about $10 billion as of a week ago and will be down further since.

      https://www.stuff.co.nz/national/health/coronavirus/120382192/super-fund-down-10-billion-says-fall-largely-unavoidable

      Reply
      • Blazer

         /  24th March 2020

        that’s the fund that wouldn’t exist if the Nats had their way.
        That’s the fund that enabled Key/English to borrow 80 billion from foreign banks.

        Reply
      • Duker

         /  24th March 2020

        Thats still billions more than was put in back in 2006-9.
        As its a long term investment on the books, it doesnt matter about yearly fluctuations.
        Remember the fund was set up at a time pre GFC when Key and National said NZ needed to borrow much much more , even in good times.
        Cullen paying down debt just before the GFC was a very prudent move as was setting aside modest amounts each year to grow over decades with compound interest and be NZs largest taxpayer along the way.

        Reply
  10. Blazer

     /  24th March 2020

    this….’The RBNZ last year proposed a compulsory bank deposit insurance program (protecting deposits up to $50,000) to replace OBR but banks and the National party strongly opposed it and the proposed bank deposit insurance has not been implemented.’

    Reply
    • Duker

       /  24th March 2020

      The current cash rate my be at 0.25% , but no NZ bank can get funds other than from captive depositors at that rate . Its more like over 2%..never mind the RB will provide the money – they should have strings attached about what the RB wants about protecting the economy . That way the Banks that agree with the new normal will survive while those that resist will wither and die over time

      Reply
  11. Dear Lord, America is doomed…

    Reply
  12. The prediction of likely deaths was absolute bullshit. The cost to the country of level 4 lockdown is fact and will need to be paid by generatons. Stop the stupidity and go back to work. Your not saving lives, you are slightly deffering death for some over 70 year olds which health professionals have failed to isolate properly

    Click to access Corona.pdf

    Reply
    • “you are slightly deffering death for some over 70 year olds”

      This has been discussed here already. In some countries with high death rates half the deaths are people from aged care facilities. And it could be much worse if less was done to limit the spread. It would be terrible for a society/country to let a large number of older people to die so some can do as they please thinking they are immune from harm (they’re not).

      Reply

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