Finance Minister Grant Robertson on the Government's decision to increase minimum wage during coronavirus lockdown.
EDITORIAL
One could be described as heaping coal on a dying fire while the other is damping down the flames to leave it smouldering overnight for the next morning.
The attempts by the New Zealand Finance Minister Grant Robertson and his Australian counterpart Treasurer Josh Frydenberg for economic survival andrecovery make an interesting comparison.
Australia's government and central bank have unleashed a massive shot of fiscal and monetary stimulus worth A$189 billion. The measures include cash payments of as much as A$100,000 to small businesses, loan guarantees, support for apprentices and a doubling of unemployment benefits. The worst-hit workers will also be allowed to access pension savings early.
Australia's fiscal stimulus in response to coronavirus is worth around 3.5 per cent of GDP and looks broadly to keep companies going and keep consumers confident and buying.
This side of the pond, New Zealand's rescue and recovery package so far is a mere 1.6 per cent of GDP and is intended not to speed the economy up, but to stop it as much as possible, protecting people's incomes while we endure a total lockdown. The better it does this job, it argues, the better we emerge.
Robertson this week elaborated on his "whatever it takes"' references in recent days as the Government continues to focus on "getting money out the door" to people and businesses needing it.
"[It is] is very much ... keeping people's incomes going, keeping their attachment to their workplaces going, and supporting businesses to remain viable," Robertson said.
Robertson told the Epidemic Response Committee that, as of yesterday, the wage subsidy has paid out $4.2b to 642,000 employees. He expected it to be "well over the $5 billion mark" when the updated figures are presented to him later in the day.
Westpac NZ chief economist Dominick Stephens called Australia's approach of providing stimulus in an attempt to boost demand, "futile". "We are in lockdown here, demand is going to be very low whatever happens."
The different approaches aren't that surprising, given New Zealand Government debt is much lower than that of other advanced economies. This week net debt was announced as $600 million below forecast at 19.2 per cent of GDP, although that will look very different post Covid-19.
Another big positive is the international view of the kiwi dollar as traders continue to watch headlines for developments in the coronavirus crisis. The kiwi was trading at US60.16c at 5pm on Tuesday compared with US60.22c at the same time on Monday, having traded between US59.44c and US60.36c.
"I think people are going to see New Zealand as a bit of a safe haven," says Mitchell McIntyre, a dealer at XE. It's becoming more and more obvious ... just how well-placed we are down here."
As that realisation spreads, it's essential Robertson's "whatever it takes" approach leaves us in the best position possible to once more attract investment and growth.
