Pressure to come up with a response to the economic impact of Covid-19 is mounting, with Grant Robertson announcing on Sunday that the "next steps of its plans to support businesses and workers" will be rolled out this week, probably starting with the post-Cabinet press conference at 4pm.
Coronavirus: Wage subsidies or tax cuts? How Govt could bail out businesses hit by outbreak
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Finance Minister Grant Robertson is poised to announce new measures to help businesses cope with the impact of Covid-19 this week. Photo / Mark Mitchell
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If we use the example of Kaikoura, affected businesses were given $500 per full-time employee and $300 for each part-time employee, for a limited time.
Could there be tax cuts?
National had been calling for immediate tax cuts, while some commentators have suggested measures like a temporary reduction in GST.
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But this looks unlikely at this stage. The Government has talked at length about wanting a targeted response because businesses in different areas are affected in different ways.
Ardern said a cut in GST would be "not particularly targeted". Even businesses who were doing fine would get a boost, and exported goods are not liable for GST.
But just because we may not get a tax cut now, does not mean we will not get one if the impact of Covid-19 becomes more general, such as when there are signs that regular consumers cut back on spending.
In that case, temporary tax cuts or even direct payments to all taxpayers could be used to boost spending (and are already being considered in some countries). The concern here for the Government would be the precedent it might set. There has never been a cut in GST before, so if it starts now it may have to repeat it.
Will the hike in the minimum wage be cancelled?
Almost every day, someone else calls the increase in the minimum wage, due to go up to $18.90 in April, to be cancelled. ANZ said this morning that scrapping this year's increase "seems like a no-brainer given pressure on businesses", following earlier calls from the likes of the Hospitality Association.
This still seems unlikely. Every time the Government has been asked about the move, its position seems more entrenched, so it would be a massive step to change course now.
Could the tax man offer any other relief?
Businesses dealing with a sharp downturn have a lot to cope with at the moment, beyond the everyday challenges.
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Inland Revenue could suspend its rules around timeliness. Following the severe gastroenteritis outbreak in Havelock North in 2016, Inland Revenue announced it would "waive interest on any late PAYE, provisional tax and GST payments for affected businesses".
This could, and should, happen here.
Who is in, and who is out?
A lot of the measures announced this week will be targeted at affected businesses, but who decides if a business is affected? Who is taking a hit from Covid-19 and who is just suffering because their business model is under strain?
The Government has already offered support for tourism and seafood, but these are not the only sectors covered. Will forestry companies be included, when the impact is clear but the Government has acknowledged that the sector was facing issues of a glut in supply well before travel restrictions were put in place on China at the end of January?
This is where it is worth considering the difference between Covid-19 and, say, the Kaikoura earthquake. In the case of the earthquake, it was pretty easy to decide whether and for how long a tourism business was affected. The roads to the north and south of Kaikoura were closed, so if you were based inside the closure, you were certain to face disruption.
For Covid-19 it is much more difficult.
While the hospitality sectors in Queenstown and Rotorua have taken a heavy hit from a lack of international tourists, so far things are not too bad for bars and restaurants in Wellington and Auckland. But some Chinese businesses have had a sharp decline.
Two businesses sitting side by side could be facing very different circumstances. How will the Government decide who needs help?
What happens with leave?
Thousands of Kiwis have been asked to self-isolate to protect others from the risk of spreading Covid-19. Most will find out they never had the virus, and so some could be asked to be isolated more than once. What happens to this time?
Some people can continue to work from home, but many can not. Should this be annual leave? Sick leave? Or something else?
While it will be cheaper for the Government if businesses pay as if staff are working, this could be another hit to businesses at a difficult time. But if you make employees use their leave, it could create additional problems. I have already heard of anecdotes of workers being reluctant to be away from work for self-isolation. The reason for this is easy to understand: If going into self-isolation means you face cancelling your holiday later in the year, are you going to be more or less likely to be upfront with your boss about the fact that you may have been in contact with someone with Covid-19?
Will today be the end of it?
Robertson is expected to stand alongside Ardern to announce measures this afternoon, but it is unlikely to be all of its response. With the spread of Covid-19 still a great uncertainty, how could it be? Further measures are likely to be announced in the coming days, while any major changes - such as general stimulus to encourage consumers and businesses to spend, could be weeks or months away.
It is also worth noting that the Government has already taken steps in response, from ending the stand-down period for benefits and ordering the Government to shorten its payment times to improve the cash flow of businesses that transact with it.
