At the beginning of March before New Zealand felt the full grip of Covid-19, Finance Minister Grant Roberson unveiled the wage subsidy scheme as an economic response to the virus. Video / Mark Mitchell
The Government's business continuity package has been welcomed by business groups and economists, especially given reassurances this is only the beginning of the fight against economic fallout from the coronavirus outbreak.
The New Zealand dollar shot up more than half a US cent after the rescue package was announced at 2pm. The sharemarket also recovered some ground from its earlier losses this morning.
BusinessNZ chief executive Kirk Hope said the $12.1 billion package will substantially help businesses keep operating through the period of the coronavirus outbreak.
The wage support and tax measures were well-focused on key areas of need, he said, highlighting the wage subsidies and leave payment scheme announced today.
Hope said the package would provide much-needed breathing space and support for all businesses.
Council of Trade Unions president Richard Wagstaff said the package provided an immediate boost to get through these challenging times.
"Ensuring that working Kiwis, including those working as contractors or casuals, are financially supported so that they can self-isolate and take sick leave, is tremendously important.
"Employers have a pivotal role to play in responding to the impacts of Covid-19 and slowing down the spread. The Government is doing its bit - now business and employers must do theirs."
The kiwi dollar jumped as high as 60.96 US cents from 60.41 just before the announcement and had recently settled at 60.75.
"I think the size is bigger than what we had expected and the fact that it's just the start" are the immediate positives, said Jarrod Kerr, chief economist at Kiwibank.
"More could be bolted on as we go."
The Government will pump $12.1 billion into the economy to soften the impact of Covid-19, the global pandemic that threatens to tip the world into a protracted recession.
The package is the equivalent of 4 per cent of the economy, and is a mix of wage subsidies, tax breaks, increased welfare support, and targeted spending in health and aviation, outstripping similar programmes in Australia, the UK and the US.
"I think this is a good start," Kerr said, adding that firms will need further assistance to cover costs other than wages.
"More targeted assistance is needed and that's what we think we will end up getting, term funding from the Reserve Bank backed by Treasury," Kerr said.
ASB chief economist Nick Tuffley said it was "a good start":
"The size of the package is a very, very good start, and it's higher than we saw in Australia last week."
"The important point is that a fair chunk of the money is going to those parts of the economy that need it most.
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"Small business will be getting some support for themselves and for their employees.
"That will help a number of them holding their heads above water for the next little while." Tuffley said the challenge will be that the support packages will require some administration from businesses, banks and the Government.
"One of the challenges is that very soon we will see small business - particularly in the tourism sector - come under some pressure."
"The money needs to be going out of the door pretty quickly."
The Treasury has forecast a 2019/20 bond tender programme of $13 billion - $3 higher than forecast at the last fiscal update.
More targeted advice needed
Canterbury Employers' Chamber of Commerce chief executive Leeann Watson says this "will support cashflow and confidence" but cautions that there also needs to be ongoing targeted business advice and support available to help businesses remain sustainable long-term, "this is a marathon, not a sprint".
"We have been advocating strongly on behalf of local business, directly and indirectly via BusinessNZ, with Government for direct cashflow support for business, and support for the livelihoods of New Zealanders, so we welcome today's announcement and response to the business community.
"We are particularly pleased to see applications for the wage subsidies are available from today, with payments from five days' time, particularly to those who have already faced significant impacts and more so following further travel restrictions over the weekend."
Watson says that businesses will welcome much-awaited certainty around available support, including clarity around leave payments.
