New Zealand taxpayers are set to guarantee loans to private businesses, perhaps thousands of them, in a stunning expansion of the Government's attempts to cushion the economy against Covid-19.
Amid a growing sense of desperation among corporate New Zealand, that the collapse of major companies could be imminent -and would then cascade throughout the economy - Finance Minister Grant Robertson said he had agreed in principle to a 'business finance guarantee' with New Zealand's major lenders.
"The scheme would leverage the Crown's balance sheet, to enable the banks to extend lending to firms which wouldn't otherwise be viable.
So far we have no details of the size of the scheme, but it is likely to see taxpayers take on billions of dollars of private sector risk.
These are extraordinary times and so the Government is taking extraordinary action.
Whereas in the Global Financial Crisis there were bailouts for major banks and financial institutions, this is potentially a bailout for just about any business.
Air New Zealand's deal for loans of up to $900 million from the Government last week was just the start.
"We certainly are aware that some large companies are concerned," Robertson said of the need for the scheme.
The move is likely to find critics from across the political spectrum, with shareholders enjoying years of good times, while loses could almost immediately be socialised.
But it should be seen in the context of the extraordinary shock New Zealand, and the global economy, is now facing.
Even some of New Zealand's largest companies have gone from bullish predictions of continued growth in January, to having almost all of their revenues gone. How long it will take to recover is guesswork.
The implications are stunning.
A few hours before the Government announced a major expansion of its stimulus programme, Kirk Hope, the chief executive of BusinessNZ issued a grim warning that the Government needed to take action quickly.
"In order to continue to employ people, some of the businesses are running out of runway, if you like."
Whether he meant to do so or not, the plight of New Zealand's airports is in focus. Auckland, Wellington and Christchurch airports are crucial infrastructure which were until recently handling tens of thousands of passenger movements a day.
Those passengers are gone but the loans the airports hold are not, and some are rolling off soon.
Finance Minister Grant Robertson. Photo / File
With financial markets in a state of paranoia, those loans may not be renewed at anything less than credit card interest rates in the current environment.
To make matters worse, those airports are among the largest building sites in New Zealand, but are taking severe measures to cut costs.
Major cost-cutting exercises there will lead to dire consequences not only in their retail operations, but also to the construction sector.
While some commentators have called on the banks so simply step in to cushion the impact for businesses in pain, it is not that simple.
If a major company comes begging for cash, the banks will be duty bound to ask for the directors to swear the company is solvent, if they have any doubts. If they do not, bank shareholders would be entitled to sue them.
For days there have been rumours that directors of major companies are growing anxious that because they have no idea how long the impact of the virus will last, they cannot be sure whether they risk personal liability if they do not question the solvency of the company.
In this context, the Government's decision to step in makes sense. It has to try to stop the rot now or risk utter chaos in the short term.
Even as we head for a state of lockdown, we have to assume that life will eventually return to normal and do everything we can to protect as many jobs as we can.
Otherwise, recovering from Covid-19, whatever the impact, could be even harder.
