Budget 2020: Government throws $3.2b lifeline in Budget to 'worst hit' firms
Thursday, 14 May 2020
An extra $3.2 billion in wage subsidies will be offered to businesses struggling as a result of the coronavirus pandemic, Finance Minister Grant Robertson has announced in the Budget.
The extension to the wage subsidy scheme is the centrepiece of a $4b business support package announced by Robertson 'to help keep people in work and position businesses for recovery and growth'.
The Government has so far paid out $10.7b in wage subsidies to employers that have experienced or predicted a 30 per cent drop in revenues in any month between January and June because of the pandemic.
The additional $3.2b will be more tightly targeted, with only businesses that have experienced or are forecasting a 50 per cent drop in revenues during the 30 days prior to their application able to apply.
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* Budget 2020: Government throws $3.2b lifeline in Budget to 'worst hit' firms
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The aid is intended to help the worst-hit businesses keep staff on their payroll for an additional eight weeks, from when the existing subsidies terminate at the end of June.
'This is a targeted version of the wage subsidy scheme,' Robertson said.
'We are expecting a significant take-up from those sectors. For other businesses — they are starting to return to normal.'
Robertson did not rule out further extensions to the wage subsidy programme when questioned on that possibility.
But he said the Government wanted businesses 'to use this time to plan and re-orient themselves'.
Businesses will be able to apply for the new subsidies during a 12-week period from June 10 and the subsidies will be paid out as a lump sum of $4686 per full-time worker and $2800 per part-time worker - which equals the same weekly rate as the existing scheme.
The wage subsidy extension is less generous and costly than an $8b relief scheme proposed by the National Party to provide cash grants of up to $100,000 and low-interest loans of up to $250,000 to all businesses that could show a drop-off in sales of 50 per cent over two consecutive months.
Infometrics economist Brad Olsen said the wage subsidy extension was important and a good move.
Its size reflected its 'much more targeted nature', he said.
'It needs to be that targeted because the Government can't keep throwing money out of the door.
'What it also does though is push out when we could see more job losses until more towards summer.'
BusinessNZ chief executive Kirk Hope said it was not yet clear whether the extension would prove sufficient.
'The question is how quickly we get demand back into the economy, and that will determine whether there need to be further extensions of the wage subsidy scheme.
If another round of relief was required, that might need to go hand-in-hand with the use of other tools to stimulate demand, he said.
Prime Minister Jacinda Ardern said Treasury forecasts suggested the Government's 'jobs stimulus' measures overall 'could see as many as 138,000 jobs saved in the current economic quarter alone' and employment rise by 234,000 jobs over the next two years.
One Treasury forecast released with the Budget predicted unemployment could peak at 9.6 per cent in June but fall back to the current unemployment rate of 4.2 per cent within just two years, Robertson noted in a Budget statement.
The new support for businesses is part of almost $16b of fresh spending outlined in the Budget.
A further $20b has been earmarked over four years for future, yet-to-be-announced initiatives.
Robertson gave few indications of how that might be spent, but did not immediately single out business support.
'What we want to do is continue to respond as necessary and as need arises,' Robertson said.
'There are a number of areas where I think we will be looking to invest further, particularly in areas such as infrastructure, housing, and there is also obviously going to be further need potentially around income support as well,' he said.
'Our economic response to Covid-19 has to happen every day, not just on Budget day.'
Olsen said the Government seemed to be keeping powder dry 'until the tea leaves become a bit clearer about where the economy is settling out'.
The Government will spend $150m providing short-term loans to encourage companies to press ahead with research and development projects that they might otherwise have cut because of the pandemic, it was also announced in the Budget.
Those loans will be available from June and managed by Government grants agency Callaghan Innovation.
It will subsidise up to half of businesses' qualifying research and development expenditure, up to a cap of $100,000 per firm.
Trade New Zealand will get a $216m funding boost to provide extra help to exporters. Trade Minister David Parker said New Zealand businesses had an opportunity to 'leverage off' the success the country had fighting Covid-19.
'The rest of the world is looking at us.
'By supporting Kiwi businesses to take full advantage of New Zealand's world-leading brand and reputation, we're making sure that every opportunity is available for our businesses, which will in turn create jobs and lift wages,' he said.
National Party finance spokesman Paul Goldsmith welcomed 'the limited extension' of the wage subsidy programme but said the Government had 'cynically set aside more than $20 billion that it can spend before the election'.
“There is very little in the way of a growth plan in this budget, beyond $230m to encourage entrepreneurship and some announcements in infrastructure that we all know they will struggle to deliver,' he said.