Grant Robertson to Business NZ on “Our Plan to Respond and Recover”

Minister of Finance Grant Robertson addressed Business NZ today, and ‘filled out further detail’ of: “…our plan for the response and recovery from COVID19, through the first wave of the immediate response, to the second wave of kickstarting the economy and the third wave where we reset and rebuild our nation from this once in a century shock.”

He also spoke on “the economic context… what our exit from Level 4 and moves through Level 3 and Level 2 look and feels like”.

The following has the Government self praise edited out.


Our Plan to Respond and Recover

Wave One: Fight The Virus and Cushion the Blow

Our initial $12 billion package included an initial $500 million boost for health, wage subsidies for affected businesses in all sectors and regions, a $2.8 billion income support package for our most vulnerable, a $100 million worker redeployment package, $2.8 billion in business tax changes to free up cashflow encourage investment, and support working from home, and a $600 million aviation support package.

We have continued to add to and modify the range of policies aimed at cushioning the blow of COVID-19 on New Zealanders.

We’ve put together the Business Finance Guarantee Scheme, alongside the Reserve Bank and retail banks. The Scheme is designed to help enable banks to provide credit to customers where otherwise the bank may not be willing to do so.

Nine banks have signed up to participate in the scheme including ANZ, ASB, BNZ, Heartland Bank, HSBC, Kiwibank, SBS Bank, TSB and Westpac. Over the weekend I signed the deed, executing the agreement between the Crown and the banks, with some banks now able to deliver on the scheme as of yesterday.

We’ve also recently announced changes to the Companies Act to help companies facing insolvency remain viable.

These changes include giving directors of companies a ‘safe harbour’ from insolvency duties under the Companies Act, enabling businesses to place existing debts into hibernation, allowing the use of electronic signatures, and giving temporary relief for entities that are unable to comply with requirements in their constitutions or rules because of COVID-19.

In addition to these changes, this morning we announced a suite of further support measures for Small and Medium Sized Enterprises.

Our tax loss carry-back scheme will allow a large number of businesses to access their previous tax payments as cash refunds, at an estimated benefit of $3.1 billion.

We are bringing forward the tax loss continuity rules to make it easier for firms to raise new capital without losing the tax benefit of their existing losses. This is a useful initiative particularly for start-up companies.

Using established services including the Regional Business Partner Network and the helplines run by the Employers and Manufacturers Association and Canterbury Chamber of Commerce, we are providing $25 million to fund specialist, tailored advice to where it is needed, fast. We have been getting clear feedback that particularly small and medium enterprises are asking for support on business continuity.

We have also introduced measures to support commercial tenants and landlords.

Many businesses may be finding it difficult or impossible to pay rent if they are no longer able to access their property, and if landlords are not receiving rent, they may not be able to meet their mortgage obligations.

As a result, the Government will extend the current 10 working day timeframe that commercial landlords may cancel the lease to 30 working days. This will be for both the period the tenant is in arrears before the notice is given, and for the period to remedy the breach.

The Government will also extend the timeframes for lenders from 20 to 40 working days for mortgaged land, and from 10 to 20 working days for mortgaged goods.

Wave Two: Kickstarting the Economy

The guidance we are releasing on Thursday for coming out of Level 4 will give businesses and workers a much better idea of what the more medium-term picture looks like for them, for the economy, and for society.

We have a range of workstreams well underway aimed at the medium term positioning for recovery.  I will mention some critical ones today.

  • We have established the Economically Significant Business Group inside the Treasury to guide our work with New Zealand’s major businesses.  We have brought in outside commercial expertise to support this, and have begun conversations with a range of network critical businesses.  There are a variety of options available should the Government need to support businesses that are essential to our recovery and our supply chains.  We showed with our $900 million package for Air New Zealand what we can do.
  • Phil Twyford and Shane Jones have tasked the Infrastructure Industry Reference Group to prepare a list of infrastructure projects and programmes from across central and local government, and the private sector, that are shovelready. These could be deployed as part of a stimulatory package as soon as the construction industry returns to normal.

The Reference Group is headed by the Chair of Crown Infrastructure Partners, Mark Binns.  It is supported by the work David Parker is doing in terms of changes to the RMA and consenting process to move things forward as quickly as possible.

Phil Twyford and Shane Jones have also continued to work on redeployment support, especially in our regions and they will have more announcements to make about that in the near future.

  • Megan Woods as Housing Minister is working to bring forward projects that will drive not only jobs, but also deal with our long term housing issues.
  • I have asked Chris Hipkins to lead the work on the critical training and employment support programme that has to take place from here.  Thousands of New Zealanders are going to need to retrain, gain new skills and support the kickstarting of our economy.  This work is in partnership with business, with unions and with training providers.
  • The Prime Minister, drawing on advice from her Business Advisory Group, has called for the creation of the world’s smartest border.  Using technology and our ‘natural moat’ as she calls it, to give us not just protection against the virus but a window to a future where we can move people and goods safely again.
  • Winston Peters and David Parker are charting a new course for trade and diplomacy in a radically changed world.  We need to continue to trade, and look again at our relationships to see how we can leverage our natural advantages and excellent progress on controlling the virus.

In every sector of our economy and society we have a need, and an opportunity, to come through the other side of this with a strong recovery plan. We have tasked all Ministers with reaching out to their sector to help develop these plans.

The Budget will be a Recovery Budget. It will include funding for the cost pressures that are necessary part of keeping our country ticking over.  But we will devote much of our resources to kickstarting this recovery.

Wave Three:  Reset and Rebuild

We have formed a core Ministerial Oversight Group for this work with the Prime Minister, the Deputy Prime Minister, myself and Minister Parker.  We will soon be reaching out to both Ministerial colleagues but also the private sector, unions and more to have input into this work.

Climate Change will continue to be a major challenge long after the effects of this pandemic have been mitigated. As Rod Carr raised yesterday, our economic recovery needs to be one where emissions continue to reduce and more sustainable technologies are invested in and taken up.

New Zealand has had a long-run problem of low productivity. We need to look at our uptake of new technology and new ways of working to ensure that this problem does not again become baked into the New Zealand economy through our recovery.

We’ve seen through this virus what happens when sectors and industries are overly reliant on certain markets for their export revenue. New Zealand must always remain a trading nation, but we will need to look at greater diversification of our export markets to make sure we are prepared for any future shocks to trade networks.

The importance of the role of the state has been underlined by this crisis.

I believe it is of the utmost importance that the state continues to play an active part in the economic recovery, providing leadership and direction as we move forward through the challenging times ahead.

Economic context

This is largely a preamble to the announcement being made tomorrow “guidance for how businesses could operate under reduced alert levels and what measures need to be taken for them to do so” so we might as well wait for what is released tomorrow.

Government and National may cooperate on Covid-19 economic response

Much of what makes the news from Parliament is combative, controversial or the worst of MP behaviour. Here’s an example of how speeches (by Grant Robertson and Paul Goldsmith) can be reasoned and reasonable, with offers of cooperation between the Government and the National opposition.

It’s good to see and important that they actually follow through with their cooperation on dealing with Covid-19.

MINISTERIAL STATEMENTS

COVID-19—Government’s Response to Economic Effects

Hon GRANT ROBERTSON (Minister of Finance):

I wish to make a ministerial statement on the Government’s response to the economic effects of COVID-19. While there is much uncertainty about the COVID-19 outbreak, it is clear that it is going to impact the world economy, and therefore New Zealand’s economy, for much of 2020. As we know from events like the global financial crisis, New Zealand is not immune to economic shocks that occur offshore and that are beyond our control, but what we can do, alongside our public health response, is to support confidence with a plan to address domestic economic impacts.

Our first responsibility as a Government is the health and wellbeing of our citizens; that is why our response continues to be led by our public health response. This strong public health response will also ultimately be critical to ensuring our economy and our people come through this outbreak in good shape. We have committed to providing the necessary resources to support our health system to protect New Zealanders’ health and wellbeing.

From an economic perspective, the Government has already made a number of immediate interventions, including support for the tourism and seafood industries, funding to increase regional business support programmes, and directing Government departments to pay businesses faster to support cash flow. Inland Revenue and the Ministry of Social Development (MSD) are supporting businesses and workers on issues like provisional tax readjustments, late payment and filing fees, wage instalment plans, and income support.

MSD’s rapid response teams are in place in regions like Tai Rāwhiti, and we have removed the stand-down period. I met yesterday with the chief executives of New Zealand’s major banks, who told me that they are well-prepared, both in terms of their own operations and in their ability to work with their customers, to get through this. The options they highlighted for customers are reducing or suspending principal payments on loans and temporarily moving to interest-only repayments, helping with restructuring business loans, consolidating loans to help make repayments more manageable, providing access to short-term funding, and referring individual customers to budgeting services. I strongly encourage businesses and banks to talk now and make a plan to get through this challenging situation.

Yesterday, the Government signalled its further steps as the impacts spread across the economy. Decisions on these measures need to balance the risks of poorly targeted spending and moving in time to support affected firms and individuals when they need it. Our business continuity package includes a targeted wage subsidy scheme for workers in the most adversely affected sectors, training and redeployment options for affected employees, and working with banks on the potential for future working capital support for companies that face temporary credit constraints. We will not be able to provide a wage subsidy for all affected firms during the duration of COVID-19. It will have to be temporary. It will also have to be tailor-made. We want to target the subsidies to those who are most affected and least able to adjust. Further details of this package will be announced next week.

These initiatives do not stop us from providing other forms of assistance to people and firms, but they are a sensible place to begin. We have also directed officials to develop longer-term macroeconomic measures that may be required to support the economy, businesses, and workers if there is a major, sustained global downturn. I reiterate that while we are planning for that situation, we are not predicting it, but planning for it is the responsible thing to do.

I want to be clear that this situation is very different to other challenges the New Zealand economy has faced in the past decade. The Canterbury and Kaikōura earthquakes were events that impacted defined areas, where it was clear which businesses were affected, why, and how. With COVID-19, which is an evolving, global health crisis, we are seeing different businesses in the same industries and in the same regions impacted differently. That is why a tailor-made response is required.

The global financial crisis was caused by the concerns about what financial institutions like banks were experiencing, but that’s not what is happening here. We have a very sound and stable banking system and a sound underlying economy. We have been running surpluses. Our net debt position, at 19.5 percent of GDP, is well below what we inherited and well below other countries. We are already ahead of the curve with the $12 billion New Zealand Upgrade Programme, which is supporting the economy.

This is a global problem that New Zealand is well positioned to deal with, and because this Government has the interests of all New Zealanders at heart, if we all work together—Government, businesses, and workers—we will get through this.

Hon PAUL GOLDSMITH (National):

Video “available shortly”

Thank you, Mr Speaker. The National Party shares the Government’s concern about the economic consequences of the COVID-19 outbreak. Already, these have been significant for the businesses affected. People have lost their jobs, they’ve had their hours reduced, they’ve lost income, and they’ve closed their restaurants without knowing when they’ll open again. Some struggling businesses will fall over, and there’s no longer a sense that the impact will be short and sharp, but only a question of how damaging it will be, and we have seen today that the latest business confidence figures are at their lowest levels since 2009.

We support the initiatives announced so far. We support the tourism and seafood industries, and faster payments from Government departments. We support the efforts of IRD and the Ministry of Social Development to help with provisional tax adjustments and late payments, we agree that businesses in distress should be talking with their banks, and we acknowledge that the Government is putting together its business continuity package, including a targeted wage subsidy scheme for workers in the most adversely affected areas and industries. We were disappointed that the details weren’t available yesterday. This has been going on for several weeks now, and it’s our belief more urgency is required. Yes, it’s complicated, and, yes, the boundaries have to be clearly defined, but we worry that the window to save jobs may be beginning to close.

We also ask the Government to reconsider its plan to lift the minimum wage again on 1 April. The Government announced several very substantial increases to the minimum wage back in 2017, when the economy was growing strongly—a 27 percent increase over three years. The situation has changed dramatically since then in the past few months. The April change will mean the minimum wage has lifted 20 percent in two years.

It doesn’t make sense to be proposing relief to businesses at the same time as significantly adding to their costs. Saving jobs should be the focus. The economic challenge before us is serious. The Government needs to shift its mind-set from adding costs to business to taking pressure off small and medium sized enterprises so that they can survive and continue to employ New Zealanders. So I urge the Minister to reconsider and postpone the 1 April rise for six months while we assess the situation. Nobody knows how widespread and deep the international slow-down will be. We need to hope for the best but prepare for the worst.

Thanks to the discipline of successive Governments, the country has relatively low debt and the ability to provide stimulus if required. The ability to borrow, however, should not stop the Minister from taking a hard look at wasteful spending, such as with elements of the Provincial Growth Fund. Some of the money would be far better used in a business continuity package than it is being used now.

We also need to recognise the longer-term economic challenges haven’t gone away. The Minister is wrong when he says that New Zealand entered this crisis with strong momentum. That’s not correct. The latest estimate from the Reserve Bank is that New Zealand grew at 1.6 percent in 2019. So a clear, coherent growth plan is outlined. We believe it should include tax relief, a substantial infrastructure plan that is delivered, relief for small businesses, regulatory reduction such as we outlined yesterday, and policies focused on putting more money in the hands of New Zealand families.

Finally, we thank the Minister for his offer of briefings from Treasury, and we undertake to work constructively to suggest ways forward as we confront this economic challenge together.

Hon GRANT ROBERTSON (Minister of Finance):

I thank the member the Hon Paul Goldsmith for that contribution—in particular his offer to work together. I’m sure he’ll appreciate the briefing that he’s getting—I think this afternoon—from Treasury.

Three quick points in response. The first of those is that this package and the work we have been doing has all been undertaken in consultation with the business community and, indeed, with the union movement. It is important that we continue to work with them. They are the people who are telling us that this package needs to be targeted and needs to ensure that it reaches the people who need it.

I also note in that regard, with reference to the member’s comment about the minimum wage, that is precisely the across-the-board, sweeping, knee-jerk reaction that is not useful at this point. What is useful at this point is ensuring that support gets to businesses who need it via a targeted approach while also ensuring that our lowest income New Zealanders get a fair go. We know that those on the minimum wage tend to spend the increases that they get because that is the nature of being on a low income, and we continue to support those New Zealanders to be able to move forward in that way.

Thirdly, I just want to make reference to the member’s comment about the timeliness of this package. All countries around the world are grappling with an evolving situation. He will not be able to find countries other than those directly in the eye of the storm who have taken actions beyond what this Government has done. In fact, this Government is well ahead of the curve, in part because of a fully funded infrastructure package that we announced at the end of January. The New Zealand Government has ensured that we are in a good position to deal with what is a serious situation, and we will continue to take a measured and active approach.