during an announcement for Labour's new provisional caucus members at Parliament on September 25, 2017 in Wellington, New Zealand. With results too close to call, no outright winner between National's Bill English and Labour's Jacinda Ardern has been able to be announced following the general election on Saturday 23 September.

The Government is now considering the future of the $10 billion wage subsidy scheme and is considering whether it should be amended, continued or just replaced by the unemployment benefit.

The subsidy has been paid to small business as an upfront payment to cover 12 weeks while the country is in lockdown.

It will end in June.

And that’s when the Government will have to decide how much more money to pump into the economy to avoid widespread business failures and massive unemployment.

Finance Minister Grant Robertson told the Covid-19 Epidemic Response Committee yesterday that so far $10.213 billion had been paid out to subsidise wages for 1,651,410 workers; they represent about 62 per cent of the country’s total workforce.

But though Treasury scenarios released last week were predicated on a minimum of eight weeks at levels four and three, it now seems the Government wants to come out of level three early after only two weeks.

Asked by Opposition Leader Simon Bridges if we could be certain we would come out of level three after two weeks, Robertson replied: “Absolutely our hope.

“And, you know, New Zealanders have done such a superb job over the period of time we’ve been in level four I’m really confident that they’ll continue to do that.

“The data is hitting in the right direction, but this allows us to lock the gains in and make sure that we’re on top of the virus.”

That will see many businesses back at work the week beginning May 11 still receiving a Government subsidy for their workers for another month.


Asked about this at her Monday press conference, Prime Minister Jacinda Ardern, said the scheme was only for 12 weeks.

But yesterday at the Committee, Robertson, took a slightly different line and suggested it could be extended.

We structured the wage subsidy scheme to be a 12 week upfront payment that was different from the way other countries have structured the equivalent type of scheme,” he said.

“We certainly hoped, and that’s proving hopefully to be so, that we would come out of the heavy restrictions well before the twelve weeks were up. “

Robertson explained the extra money – the subsidy paid while workers were actually earning wages — “was a recognition that there would be further adjustment in transition for businesses and a new environment.

‘In terms of where we go from here, there are clearly particular sectors that are going to be more effective than others.

“And so when we look to the future of the wage subsidy scheme we have to look at the range of options which run from carrying it on in some form or other; universally moving it to a more targeted scheme or looking at other ways of supporting business and households.

“And so we’re in the process of doing that work right now.

“But the blanket 12-week scheme is a 12-week scheme and well before those twelve weeks are up people will be well aware of what our support will be.”

The question this begs is how high unemployment will be in June.

Treasury’s “Scenario One” forecast has it at 13 per cent, but that has assumed another four weeks at Level Three.

Employment Minister Willie Jackson told the Committee that while the subsidy has been in place some people had lost their jobs and that number would grow.

“We know that all businesses are hurting at the moment, and I accept that, and without a doubt, there is going to be a bit more pain. No doubt about it,” he said.

However, he said that Treasury’s unemployment projection did not take into account the support the Government was planning.

“I accept the different figures that they put out — if we don’t give any support,” he said.

And he implied that there would be more support after the wage subsidy.

“We’ve still got another eight weeks in terms of wages support for workers,” he said.

“There’s still a lot of support there.

“So I think sometimes they are putting up figures and saying this is how bad it could get if there is no assistance.”
Jackson said Robertson was working on strategies to provide support businesses which would help keep jobs.

We’re hearing the call from businesses,” he said.

“There are unemployment predictions of anywhere between 8 and 20 per cent.

Labour MP Deborah Russell provoked some controversy when she suggested to the Committee that we were seeing a number of small businesses really struggling after only a few weeks in a pretty bad situation.

“This must speak to the strength of those small businesses going into this lockdown,” she said.

“It worries me that perhaps people went into small business without really understanding how you might build up a business or capitalised in the first place so that you have the ongoing strength to survive a step back.”

The Taxpayers’ Union demanded that she apologise for her comments saying that no business was on solid foundations when the Government said it must cease operations for a month but still have to pay its staff.’

Robertson was quick to say he was not sure he agreed with her and that it was tough getting a small business up and running, but New Zealand small businesses had been pretty good at it.

But behind the scenes, Robertson’s officials all know that many small businesses will be vulnerable when they come out of the lockdown.

Many will be relying on banks accommodating them with mortgage holidays (much small business credit is secured against family homes).

The Government has also guaranteed 80 per cent of the loan under a business loan guarantee scheme.

Robertson, perhaps anticipating criticism of the scheme, told the Committee that he thought the message had not got down to all branches of banks about it.

“I hope you’ll join me in encouraging all of our trading banks to make use of the scheme to look pragmatically at businesses who were viable going into this and who are in a vulnerable state now,” he said.

But takeup of other aid from banks was large.

“I saw some numbers yesterday from one bank talking about up to 40000 customers, both commercial and personal, who have shifted to things like interest-only or who have deferred mortgages plus lending,” he said.

With the country likely to enter Level Two in just over a fortnight, businesses will be able to more or less resume normal activity.

That will take some pressure off the huge spending on schemes like the wage subsidy — but the big question will be how much money will be needed to assist business which will be struggling either because of the impact of the lockdown or the ongoing impact of closed borders.