Major Economic Decisions as NZ Govt. Readies to Fight COVID-19

In BICSI Blog, BICSI Bytes, Newsby

The New Zealand Government recently announced further support for the economy, workers and businesses as the country unites to prepare for Alert Level 4 in the fight against COVID-19.

Measures taken by Cabinet include:

  • Remove of cap on Government’s wage subsidy scheme, which will inject a further NZ$4 billion into the economy over the next 11 weeks;
  • Expediting urgent work on new income support measures for all workers above and beyond the wage subsidy scheme, to be appropriate for how the economy will operate under Alert Level 4;
  • Government, Reserve Bank and retail banks agreed in principle to significant temporary support for mortgage holders and a business finance guarantee scheme for those impacted by COVID-19; and
  • Freeze on all rent increases and possibly extending no-cause terminations to protect people during this difficult time.

Commenting on the decisions, Finance Minister, Grant Robertson said: “We have a chance to beat this virus as we step up our public health response. We know this will have significant impacts on the economy, and we are doing what it takes in response to this rapidly changing situation.

“These significant measures – along with previous moves to raise benefits and tax changes to support cashflow – are focussed on cushioning the blow for workers and businesses as we respond to this unprecedented global crisis. As we have said before, we cannot guarantee to stop all job losses, but we are doing our best to cushion the blow.”

Now that many New Zealanders may not be able to go in to work for the next few weeks, the government’s priority is ensuring they continue to receive some form of income through this period. All employers affected by COVID-19 will now be able to apply for the existing subsidy to support the wages of all of their workers.

The changes mean the forecast cost of the wage subsidy scheme is being lifted from $5.1 billion to $9.3 billion. This assumes 50% of businesses access the 12-week scheme.

“The $9.3 billion is an estimate, not a cap or a floor”, Robertson qualified. “This means the support will be there to meet the demand. We are doing what it takes to put support in place for workers and businesses.

“We can do this because New Zealand is one of the best-placed economies in the world to deal with COVID-19, due to low Government debt and strong economic fundamentals going into this global crisis.”

Wage subsidy scheme – Cabinet decisions on 23 March:

  • The previous $150,000 cap is being lifted, so all employers can access the full payments to subsidise each of their workers’ salaries.
  • New businesses (eg. less than a year old) and high-growth firms (eg. have had significant increase in revenue) are also eligible. They need to demonstrate the revenue-loss assessment against a similar time period, for example a 30% loss of income, attributable to COVID-19, in March 2020 compared to January 2020.
  • Self-employed people with variable monthly incomes are eligible if can demonstrate the revenue-loss assessment against the previous year’s monthly average (eg. 30% loss of income attributable to COVID-19 comparing March 2020 to the average monthly income in the period March 2019 to March 2020).
  • The scheme does cover registered charities, non-governmental organisations, incorporated societies and post-settlement governance entities.

Other criteria still apply, including the 30% revenue reduction and for businesses, on their best endeavours, to maintain their named employees at 80% of their pre-COVID income. The same 12-week period applies to the wage subsidy scheme.