Covid-19 coronavirus: Govt keeps $14b in virus fund for global slide, lockdown risk

The Labour-led coalition announced a $50 billion covid recovery fund in the May. Photo / Getty Images

Leaving $14 billion available in the country's covid-19 recovery fund is prudent given the deteriorating outlook for the world economy and the risk that New Zealand could yet have to go back into a second lockdown, Prime Minister Jacinda Ardern said.

While the government is doing everything it can to avoid another lockdown, Ardern said it had to also be prepared for that risk and be prepared for the cost of that.

The cost of the wage subsidy in the first lockdown was "over $10 billion. So what we're leaving here is $14 billion," she told journalists at Parliament.

"We have to be mindful and prepared and responsible by allowing that fund to be available in the event that we need it or in the event that we continue to see on-going covid-related costs," she said.

"It is about striking a balance and we believe this is a prudent approach."

The Labour-led coalition announced a $50 billion covid recovery fund in the May budget, although it had actually already allocated $13.9 billion in its initial response to the pandemic.

At the Budget it allocated another $15.9 billion for the wage subsidy extension, business tax relief, education sector support and other packages. That left $20.2 billion in the fund.

After the May budget the government allocated another $570 million for a covid income relief payment, and another $700 million to loosen the wage subsidy scheme, as well as $300 million for the health response.

Further support

Cabinet today agreed further support for ongoing health, border and economic response measures will require about $3.2 billion, with announcements to be made before Parliament rises. That figure includes $760 million recently allocated for spending on improving drinking water, storm water and waste water systems.

Finance Minister Grant Robertson noted that while the NZ economy had performed better than expected, the outlook for the global economy is worse than forecast.

"This means we have money in our back pocket if we need it, including if a future lockdown is required, or the outlook for the international economy continues to get worse and further stimulus is needed for the economy.

"If it's not needed the money will not be spent, it will not be borrowed and we will have less debt to repay," he said.

On the other hand "covid will be with us for some time."

Ardern has already signalled there will be no extension to the wage subsidy and it will end three weeks before the election. At June 26 it had covered some 1.7 million employees.

Robertson said there is also still sufficient funding available in the small business loans scheme and the business finance guarantee scheme and they won't need topping up before the election.

Quarantine fee

Cabinet today also considered whether a charging regime should be introduced to help cover the cost of managed isolation for New Zealanders and other permanent residents returning to the country.

The Opposition National Party has proposed a $3,000 fee and Minister Megan Woods said at the weekend that some form of cost recovery was being considered.

Ardern said advice was still be sought on that. She emphasised that her priority was ensuring managed isolation remained robust and she did not want to invite a legal challenge that could reduce the effectiveness of the regime.

She noted that designing a scheme that could differentiate between people being forced to return home through no fault of their own, and those New Zealanders now choosing to travel overseas and then returning home, would come with "significant legal ramifications." That was the level of detail the Cabinet was now working through, she said.