John Armstrong: Cash aid offers space to figure out what to do

Finance Minister Bill English. Photo / Getty Images

Apart from handing out cash to those who will really need it - and quickly - the Government's interim assistance package gives those affected by last week's quake another vital commodity. It offers them much-needed breathing space.

It gives employers who believe they can get their businesses up and running another five weeks to do so without having to pay full wages to staff.

Those employees who cannot go back to work immediately because of quake damage or because their employer intends closing the business, get a reasonably substantial, if so far only temporary, replacement income.

The payments exceed the $350 a week subsidy paid out after last September's quake.

The Government has sought - in John Key's words - to err on the side of generosity. Few will quibble at the size of the payments. Though those payments are substantially higher than the dole, no one is going to get rich on $500 a week for just six weeks.

The money gives those accepting it time to contemplate their options. The package might help stem the worrying exodus out of the city.

It also gives the Government time to develop a package of medium-term measures to help resuscitate the Christchurch economy.

It also gives the Government time to get a clearer picture of which businesses will survive and which will not.

Such information is scanty at best. The Beehive got a taste, however, of what lies ahead with news of the permanent closure of two Christchurch supermarkets with the loss of around 240 jobs.

The Government expects to take a $120 million hit from yesterday's package - more than 10 times the amount spent on wage subsidies after the first quake. In one stroke, the Government will have already spent as much as it paid out back then on assistance, relief and restoration of services.

John Key says this is just the beginning of the "hundreds of millions" that will have to come out of Government coffers, not least to pay the repair bill for such things as roading, which is now clearly beyond the Christchurch City Council's financial means.

In the process, the focus of this year's Budget is already shifting to the rebuilding of Christchurch.

Before last Tuesday, Finance Minister Bill English had been emphasising building national savings and reducing vulnerability to foreign debt.

That is now "a" focus, rather than "the" focus. And the more money gobbled up in fixing Christchurch, the less for measures to enhance savings, especially as the slowdown in commercial activity in the country's second biggest city will simultaneously cut tax revenue.

Key yesterday stressed the downstream impact of the quake would not delay National's medium-term goals, such as overhauling the public service and tackling welfare reform.

But meeting the needs of Christchurch is starting to seriously upstage National's wider nationwide policy agenda.

Without an earthquake levy - which Key does not favour on grounds it would slow the economy - there will only be peanuts in the Budget for extra spending on that agenda.

Unless, of course, National delays the date the Government's books get back into surplus. That means more borrowing. But the scale of the disaster will likely give Key and English licence to justify doing so.