The Government is committing to helping coronavirus-affected businesses pay their staff’s wages.
Cabinet on Monday agreed to the development of a “business continuity package”.
Included in the package is a targeted wage subsidy scheme (similar to that used after the Canterbury and Kaikoura earthquakes), training and redeployment options for employees affected by coronavirus, and options around how the Government could work with banks to support companies that face temporary credit constraints.
Details around the package are still being worked through. A further announcement will be made next week.
Finance Minister Grant Robertson said it was important to get the timing and criteria right. He wouldn’t comment on the size of the package, saying this would depend on the criteria.
It isn’t clear the wage subsidy will help contractors.
Treasury and the Inland Revenue Department have been directed to look at ways the tax system could help affected businesses. Treasury and the Ministry of Social Development have been told to develop policy options to support households to "maintain incomes and labour market attachment".
The existing travel ban has been extended by a week.
The country’s medical officers of health have been given the power, under the Health Act, to quarantine ships and aircraft if they believe people with coronavirus are on board. Previously they only had the power to quarantine individuals, not entire vessels.
Cabinet has agreed that as of March 23, the two-week stand-down period for anyone who has lost their job and applied for a benefit, will be removed. The stand-down period will be reinstated in eight months’ time.
Robertson ruled out cancelling the April 1 minimum wage hike, as suggested by ANZ economists. Prime Minister Ardern said it was important people spent money to stimulate the economy.
Robertson said he had a “constructive” meeting with the CEOs of New Zealand’s major banks on Monday, having previously told them to keep lending to even their most "challenging" dairy customers.
He said there wasn’t discussion about giving banks concessions around implementing the Reserve Bank’s new bank capital requirements.
ANZ economists earlier in the day commented: "If stresses in the financial system started to emerge, there could be a case for the RBNZ to use the counter-cyclical capital buffer to temporarily lower capital requirements (by 1.5% of risk-weighted assets), which would help credit keep flowing. Likewise, liquidity provision would be important if there was financial system stress."
The New Zealand Bankers’ Association reiterated banks could potentially help their customers affected by coronavirus by:
- Reducing or suspending principal payments on loans and temporarily moving to interest-only repayments
- Helping with restructuring business loans
- Consolidating loans to help make repayments more manageable
- Providing access to short-term funding
- Referring individual customers to budgeting services.
The Government has also directed all government departments to pay their bills within 10 working days of receiving them to support businesses’ cashflow. Prompt payment changes were due to take effect in June, but have been brought forward.
In terms of other coronavirus support measures already in place, Inland Revenue is continuing to enter into instalment arrangements and waive penalties on a case-by-case basis where individuals and businesses have had their income and cashflow affected.
An extra $4 million has been invested in the Regional Business Partner Programme to allow for extra advisors and give them more time on the ground supporting businesses.
And the Government is working with Xero to get real-time information about the impacts on business, particularly SMEs.
National's finance spokesperson, Paul Goldsmith, called for more urgency by the Government.
He said the fact it would only make decisions around the business continuity package next week, shows it is "startlingly flat footed".
“The Government say they’re trying to get ahead of this but they’re getting bogged down by detail," Goldsmith said.
“Businesses need certainty and relief in the short term followed by broader economy-wide changes, like tax relief, so the economy can quickly bounce back from the downturn.”
46 Comments
8.42 million households in Australia spend, on an average, $96 a week on dine in and takeaway. That's $800m a week only in eating out.
Now put that into perspective and think how much of an impact will a package of $10b make, even if it goes straight into the pockets of consumer?
Let me give Grant a clue - you don't have one!
No one has had a proper clue as to how to solve the conundrum that we collectively found ourselves in, in 2008. ( Answer?: It should have been left to run it's course back then when it was absorbable)
Everything since then has been an attempt to solve an unsolvable credit( debt) problem, and it's just made it worse.
There is no painless way out of this now. No amount of 'stimulus'; grants ( to use a pun); handouts; lowering of interest rates or revamping of credit weightings is going to quieten this disaster in anything but the really short term.
The horse bolted 12 years ago and we had no idea where it went, then
Now, we have no show of tracking it down. Nothing 'we' do is going to work whatever is tried.
There's mass debt default coming. To personal balance sheets; corporate ones, and sovereign ones. If we're lucky we'll avoid the mandatory war. But only if we are lucky....
"There's mass debt default coming"
When there is no return on Debt (ie zero interest) its effectively worthless
Which tells you mass default was baked in long ago
Mass debt default is mass wealth default
Which normally means the rules no longer apply and war it is
The solution to that is to pay for it with a land tax. That way the Landlord's will have to get more competitive due to the tax, and they'll be paying for the spending. Land taxes reduce rents because of the increased pressure to be more productive and efficient with landholdings causing an expansion in tenancy supply.
"The selling price of a good that is fixed in supply, such as land, decreases if it is taxed. By contrast, the price of manufactured goods can rise in response to increased taxes, because the higher price reduces the number of units that are made. The price increase is how the maker passes along some part of the tax to consumers.[6] However, if the revenue from LVT is used to reduce other taxes or to provide valuable public investment, it can cause land prices to rise as a result of higher productivity, by more than the amount that LVT removed.
Land tax incidence rests completely upon landlords, although business sectors that provide services to landlords are indirectly impacted. In some economies, 80 percent of bank lending finances real estate, with a large portion of that for land.[35] Reduced demand for land speculation might reduce the amount of circulating bank credit.
While owners cannot charge higher rent to compensate for LVT, removing other taxes may increase rents."
Hi Kate,
I always appreciate your insight. Where do you see the property market going. Mortgage brokers are screaming, buy, buy, buy!
However, my bearish bias, is yelling, hold off, hold off!
Surely, even in NZ, where “prices only ever go up,” there is a need to be cautious as we head into a recession?
Am not convinced there will be a crash. I’ve seen this all before and prices just keep heading up. There is a massive housing shortage, with cashed up boomers, looking to make money outside of the banks. Property is the only game in town and I think it will be for generations. No political party really has the will to change things.
Wait till National are back in, they’ll squash the FBB and invite investors from China and India to partake in our bullet proof housing market.
While I think it’s awful, the trajectory of house prices, is only going up!
Generational self-absorption at play. In previous times the emphasis was on creating affordable home ownership. Today the moral failure of governance has been that everything is focused on enlarging certain folks' portfolios at the expense of preceding and succeeding generations.
I am not convinced about a crash either.. in my head there is only a couple of things that would cause house prices to drop (barring volcanoes and asteroids type event).
They are... job losses, meaning no rent or mortgages paid.
Or.. a liquidity crisis meaning no-one will be lending money to buy the new builds, Which will lead to... job losses.
They cannot raise interest rates, even as the value of money diminishes. So no worries there.
So housing is still one of the best and resilient asset classes around, but it shouldn't be.. it was made so by huge population growth and money printing.
Please Grant, don’t do anything to prop up businesses that have been swimming naked in the tsunami of mass-migration induced GDP growth. Now the tide’s going out let them be seen for what they are...a bunch of low productivity leeches. This corona virus is no good thing but maybe if there’s a good clean out we can come out with a better foundation to rebuild on.
That's totally what Kauri was referring to and not the exploitative hospitality and tourism businesses who have been propped up with generous immigration policy.
These folk have been making pretty good money off this arrangement for a while. Surely they can weather the risks of being in business, standing on their own two feet as they'd advocate for others? Everyone's aware when going into business or investment that there are risks, surely. They aren't children running these businesses.
Why are we now so intent on socialising their risks while they privatise their profits?
I would say that a good proportion of the firms that have been involved with Chinese tourism would have been cash payment, no declared income. Possible even paid for in China. So these firms will I hope struggle to get their hands on any of the govts free handouts....
Can anybody tell me why retail businesses are 'welcoming' this 'business continuity package' announcement from the government? Since when did our retail sector become reliant on Chinese tourists? Are we really going to bail out $2 stores to keep up the 'saving jobs' facade?
Is this subsidy just a taxpayer-funded election tactic designed to grab National votes?
The demand on the government for helicopter money will become a flood as you could blame the entire recession on coronavirus. Soon everyone will have their hands out. Those that miss out will start crying foul and demand reparations. If/when helicopter money arrives, it will be inflationary (more dollars chasing less goods) and we will see interest rates jump up. As the credit tide recedes, we find out who isn't wearing any togs.
Just as it should be in a capitalist system. Interesting that all these free marketeers are now calling on the government for bail outs...
I cannot see how the amount of money would be anywhere near to being sufficiently large enough to have any inflationary effect whatsoever. And most people if they had any sense would just save it. Just like when the OCR is dropped, sensible mortgaged people pay off more principal than before and do not just use their extra money for frivolous expenditure.
This concept of bailing out private enterprise feels just wrong to me. And in order to do so properly would increase govt debt by huge amounts. And how long would this govt want to keep doing that for? It has no idea whatsoever at the moment on when tourism may return to normal.
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