National Party finance spokesman Paul Goldsmith says tax cuts should be part of the broader aim to stimulate the economy. Photo / Mark Mitchell
National Party finance spokesman Paul Goldsmith says tax cuts should be part of the broader aim to stimulate the economy. Photo / Mark Mitchell
National Party finance spokesman Paul Goldsmith says the Covid-19 crisis will plunge the economy into a "deep" recession and the key to today's government package will be how quickly businesses can get help.
"Certainly it seems like we're [heading for] a deep recession," Goldsmith told the Herald this morning.
"Itcertainly has the potential to be bigger than the Global Financial Crisis. The most likely outcome it seems is that it will go on for quite some time, and that will have an enormous impact on the economy."
Today the Government will release phase one of its economic response, expected to include wage subsidies so employers can keeping paying workers even though work has dried up.
It is also expected to have a massive boost for health resources and further cash for businesses to cover pay for workers who are sick or self-isolating.
"It's a question of how quickly it arrives and how substantial it is," Goldsmith said.
"What we need is cash in the hands of businesses right now."
He said employers had reserves to pay for sick leave.
"But businesses are facing unprecedented pressures. What you can't cope with is if half the workforce is on two-week isolation. There is room for assistance in that area."
Businesses have also been asking for access to capital, and Goldsmith said the Government should be prepared to step in.
"Working capital for businesses and some government involvement as a lender of last resort or some sort of backstop is another area I would expect them to make announcements on today."
A broader stimulus package should include tax cuts, which would cost billions, but Goldsmith would not say if benefits should also be increased to give non-workers the same shot in the arm.
The Government has been trumpeting its fiscal discipline in the lead up to the Covid-19 crisis, but Goldsmith said the previous Government also deserved credit.
"This is rainy day for which we have prepared. Bill English, going from the GFC through eight or nine years of discipline to allow us to respond effectively today is in no small measure due to the work he did."
National, along with business groups including Tourism Industry Aotearoa, has called for the minimum wage increase to be delayed, and Goldsmith said that was because not all businesses will qualify for the government wage subsidy.
"The ripple effect across the economy is huge. Not just tourism but entertainment and other businesses.
"That's why we don't think it makes sense to roll out the significant minimum wage increase. That should be delayed."
The Government has previously ruled that out on the grounds that most businesses would have already moved to accommodate that wage increase, and workers with more cash will also help to stimulate the economy.
