Liam Dann talks to Finance Minister Grant Robertson about the economic impacts of the current level three lockdown.
New lockdown costs won't require the Government to draw on the $14 billion it had set aside for further outbreaks of Covid-19, Finance Minister Grant Robertson says.
"We've actually still got enough money within what we previously allocated to be able to deal with this. But the $14 billion isstill there and able to be used if we need to," Robertson told the Herald in a video interview this week.
In the case of the wage subsidy, there had been a significant underspend on what was budgeted for, he said.
"We budgeted for about $3.9 billion going out there", Robertson said. "It has been much closer to $2 billion."
The additional cost of the subsidy extension and the new two-week scheme would add another $1.6b.
In July the Government set aside $14b, from its May Budget, to be used for long term, recovery challenges like a second wave outbreak.
Finance Minister Grant Robertson during his announcement about the wage subsidy scheme extension at Parliament on August 17. Photo / Mark Mitchell
"We've said we will use it if we need to use it. We're sticking to that view. I've seen others who want to allocate it for other projects and so on.
"I'm sure over the next couple of years there would be reasons why we'd want to use it but right now we want to make sure that it's still available to be used."
Robertson said the Reserve Bank gearing up for a potential $100b of quantitative easing to cover new Government borrowing did not necessarily mean that much would need to be borrowed.
"We will end up with net debt peaking at around 53 to 54 per cent of GDP," he said.
"That is very high in recent New Zealand history but not relative to the rest of the world and our balance sheet is robust enough to withstand it."
He declined to be drawn on suggestions by some experts that the country will need to raise new tax revenue pay back debt.
The Labour Party is yet to release it tax policy for this election campaign.
Repayment of debt was important but needed to be viewed over a very long time horizon, he said.
Robertson said he'd seen the wide range of new economic forecasts released in the past two weeks.
"The overall advice we've had is that the near term was looking to be significantly better than forecast because the economy had stayed stronger past what most people thought was a pent-up demand."
But at the same time the international outlook was going in the other direction, he said. Generally speaking, the forecasts had been weighted towards better performance in the near term and more difficult in the longer term.
"The immediate impact of the lockdown, as long as it is only two weeks, is manageable," he said.
"Nothing has changed for me. Our experience is that the best economic response is moving fast and early with a public health response.
"This is definitely the right approach and if we're able to get ourselves back to some normality relatively quickly business will be able to get through."
But there was a caveat there for small business, he noted.
"Businesses operating on much smaller margins, obviously this is a testing time for them and that's the particular reason for wanting that assistance — the wage subsidy — to get out the door quickly."
Longer term, the issue would be confidence, Robertson said.
"New Zealand has done this. That's what gives me some confidence and we can do again and we can come out strong just like we did then."
