Almost $1 billion paid in wage subsidies during lockdown

Thursday, 2 September 2021

Some Auckland businesses believe this lockdown could be the straw that breaks the camel's back and they may have no choice but to close down.

Almost $1 billion has been paid in wage subsidies so far this lockdown, the Ministry of Social Development says.

To August 31, $922,381,382 had been paid to businesses that suffered a revenue drop of at least 40 per cent due to the change in alert levels. In total, 225,335 applications had been approved, covering 822,316 jobs. Another 14,708 applications were declined and another 73,000 were still being processed, group general manager client services support George van Ooyen said.

The wage subsidy is being paid in two-weekly instalments. Applications for the second instalment open on Friday.

Prime Minister Jacinda Ardern announced on Thursday that only Auckland would remain in level 4.

Last year, more than $13b was paid in wage subsidies.

* Wage subsidies have been a 'life line' for Invercargill business owner

* Extra two weeks of wage subsidies expected to protect 470,000 jobs at cost of $510m

ANZ chief economist Sharon Zollner said subsidy uptake was slower this time because firms’ balance sheets were in good shape.

Some big businesses paid theirs back when they went on to turn healthy profits, such as The Warehouse, which repaid almost $70 million.

ANZ chief economist Sharon Zollner said uptake was slower this time because firms’ balance sheets were in good shape, with good cash buffers.

Employment intentions were still strong and there was less panic because people had been in level 4 before, and households were more confident their jobs would still be there when alert levels dropped.

Publicity about high-profile wage subsidies could make businesses less keen to claim, she said, because of the PR aspect of reporting a profit afterwards.

“But overall it’s a good result, if firms needed it they would take it.”

The amount claimed for the next two weeks could be lower because the rest of the country had dropped to level 3 and more businesses were able to operate.

Infometrics economist Brad Olsen said uptake was lower than expected.

“It appears that larger firms are holding off more this time, with a reluctance to accept support if strong spending surges back after lockdown – meaning another period where a business might have taken support over the lockdown but then turns a strong profit on the bounce back.

“There’s certainly a feeling though that smaller operators are feeling it harder, without as much cash behind them to weather the storm.”

Van Ooyen said applications had to be dealt with carefully.

“The wage subsidy scheme is operating as quickly as it was last year and we are not aware of any problem with people being able to get through to our phone lines – waiting times have been short.

“We’re finalising data analysing the speed of processing, but overall it is showing that the great majority of applicants receive payment within three working days.

”For those applicants where it is taking a bit longer, we will be in contact in due course to discuss their application and next steps. Businesses and sole traders are generally paid within 24 hours of approval, except for approvals over the weekend, which are paid on the Monday.

“We are currently finalising data on timeframes for processing of applications and expect it will be available next week.”