Prime Minister Jacinda Ardern confirms wage subsidy to end in September

Monday, 6 July 2020

Prime Minister Jacinda Ardern lays out her 'five-point plan' for economic recovery at the Labour annual conference. First published in 2020.

The Covid-19 wage subsidy scheme that has supported nearly 2 million jobs will end in September, Prime Minister Jacinda Ardern said.

The $11.9 billion scheme has been in place since March, and has helped insulate 1.7 million workers and their employers from some of the economic affects of the coronavirus pandemic.

On Sunday, Adern confirmed that the scheme, already extended to September, will not continue.

“We've clearly signal that a wage subsidy is not something that can continue on in the never-never,” she said.

Prime Minister Jacinda Ardern speaking to reporters outside Labour’s annual conference on Sunday.

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“It would delay the critical work that businesses may need to do to pivot in the new Covid environment, and businesses themselves have said that they think that continuing for too long, could run the risk of being harmful for the long term resilience of some of those businesses.”

The scheme pays businesses $585.50 per week for each full-time employee, which is passed on to the worker, if the business has suffered a loss of revenue of 40 per cent within a month due to Covid-19. Before the scheme was extended in June, businesses had to prove a loss of 30 per cent of revenue to be eligible for the scheme.

The scheme will end on September 1, three weeks out from the general election. That could mean job losses as the subsidy ends, with businesses deciding they cannot resume paying full wages to their staff.

Ardern said workers would have to move onto the Government’s “income relief” payments, and there was other support for businesses that were struggling.

“We will have to move into other forms of support. The $400 million tourism fund enables us to provide that. We also, of course, have the Covid recovery income support payment.

“So anyone who does find themselves without work can move on to that payment, which is consistent with what they would have received if they were receiving the minimum of the wage subsidy.”

The income relief scheme, which is expected to cost the Government $1.2b, pays workers who have been turfed out of a job due to Covid-19 income support of $490 each week. The 12-week payments will be available until November.

The scheme has been criticised by some in the welfare sector for creating a “two-tier” benefit system, paying more than the usual jobseeker benefit payment, which is $250 a week.

If a person receiving the income relief payments is still unemployed after 12 weeks, they are moved onto jobseeker payments.

Data released by the Ministry of Social Development last week showed there were more than 200,000 people receiving unemployment payments, and 56,000 of these had asked for support since March 20 – days before New Zealand entered lockdown.

In the four weeks to June 26, 11,500 new people had sough income support. There were 10,579 people receiving income relief payments.