The government’s Budget, presented by the Minister of Finance the Hon Grant Robertson on 14 May has addressed, in the words of the Minister, “a 1-in-100 year health and economic challenge” as it moves to rebuild the economy post-COVID-19.
“With the outbreak of COVID-19, New Zealand now faces a 1-in-100 year health and economic challenge. The pandemic continues to evolve, and it has already caused enormous social and economic disruption. It has required agility on the part of New Zealanders, the Government included,” said the Minister.
“We have quickly reoriented the Budget 2020 package to focus on maintaining critical support for existing public services and supporting key infrastructure investments. This has meant putting ‘on ice’ new initiatives under priority spending areas that were announced in the Budget Policy Statement. We may well return to these projects, but for now our focus is on our response, recovery and rebuild from COVID-19.”
The focus of the Budget is to grow New Zealand’s economy, create jobs, strengthen the country’s public service and to start to rebuild together.
Key spending:
- $50 billion to deliver the COVID-19 Response and Economic Recovery Plan with the goal of saving up to 138,000 jobs
- $4 billion business support package that includes a $3.2 billion extension to the wage subsidy scheme
- $3 billion infrastructure investment and a public housing build programme for 8,000 new homes that should boost productivity and create more jobs
- $1.6 billion trades and apprenticeships training package
- $1 billion environmental jobs package that includes initiatives to boost pest control and for the restoration of wetlands
- $3.3 billion to strengthen core services, including health and education
- $1 billion to Māori focussing on job creation, and
- Almost $200 million to support Pacific peoples.
Business support
The government’s $4 billion business support package includes a targeted $3.2 billion wage subsidy scheme extension.
From Wednesday, 10 June (when the current scheme of 12 weeks runs out) businesses that have, or expect to experience, a 50% loss of revenue over the previous 30 days compared with the same period in 2019 will be eligible. The initial scheme had businesses needing to show a 30% drop in revenue. The wage subsidy will now become available to high-growth firms, and to Callaghan Innovation-recognised research and development start-ups.
The payment remains the same at $585 per full-time employee; it will continue to be paid as a lump sum.
The Budget has introduced the reinstatement of depreciation deductions for commercial and industrial buildings, an increase in the provisional tax threshold, an increase in the threshold for writing off low-value assets and much more.
The tourism sector has been particularly badly hit during the COVID-19 pandemic. Many businesses have experienced zero turnover since the summer and face a bleak outlook until at least 2021 due to our border being closed. The government will provide $400 million for a domestic tourism campaign and to provide support so businesses can plan their futures.
Paying for it all
Treasury’s projection is that by 2024, New Zealand will have borrowed nearly $200 billion, almost doubling the country’s current debt. It is estimated that New Zealand will record deficits in the tens of billions of dollars until around 2028.
We are here to help
New Zealand has not known such a shock to its economy for almost a century. The year ahead will be difficult for us all, no matter what our circumstances, as we all rebuild our lives post-COVID-19.
Please don’t hesitate to contact us if you need advice or simply need a sounding board. We are here to help you.