Editorial: Budget 2020 needs a tight focus on surviving recession

Finance Minister Grant Robertson during his Wellbeing Budget 2019 presentation in the lock-up at Parliament, Wellington. Photo / Mark Mitchell

Editorial

EDITORIAL:

It's being pitched as the Recovery Budget but the Survival Budget would be closer to the truth for many New Zealanders.

Vision, hope and optimism about New Zealand's future are good things.

We'll need to hear some of this from Finance Minister Grant Robertson when he takes the floor in Parliament this afternoon.

There will be a temptation for the Government to treat the historic nature of events this year as opportunity to radically overhaul the economy. The prospect of transformation to a fairer, more productive economy is hard to argue with.

Today's Budget is not the time for abstract ideas.

It is still time for emergency action and support for critical industry sectors.

The reality is that the economy is not yet in recovery mode. It is still in the thick of the sharpest contraction we have seen since at least 1987.

Freedom from lockdown creates some sense of progress. But the bounce back in activity is not a return to normal.

For many economists, debate about the exact timing of level 2 and details of the rules were a side-show.

There is no way around the enormous hole in revenue that is created by the closure of the borders.

Tourism, foreign students and high levels of immigration have bolstered our economy for more than a decade.

Now they are gone. So yes, we do have to pivot and transform. Businesses are braced for that and ready to get on with it.

But right now, and for months to come, many will be consumed with a daily battle to stay afloat.

We are already witnessing a daily procession of business closures and large scale redundancies in the news headlines.

For employers close to the edge, long-term vision will mean little.

They need financial help.

And the rest of us need them to retain workers.

More than 100,000 households have taken mortgage relief from their banks. More than 1.7 million workers are on government wage subsidies.

Unemployment is expected to more than double in the next few months to peak at around 10 per cent before, we hope, falling sharply as a real recovery begins.

The worst is yet to come for many New Zealanders.

As the drama and urgency of the lockdown fades, we face a hard winter of recession.

What the public is looking for is reassurance.

We've been reassured that the Government has no shortage of fiscal fire power to see us through.

It has already deployed more than $20 billion to keep and could easily double that according to projections of many economists.

Today we need to see some of that money being targeted and deployed to those most in need.

Given the level of uncertainty about the time frame and shape of the downturn, it may well be too early for Robertson to commit a large chunk of the funds he has at his disposal.

His task will be to reassure that financial help is on the way that it will be delivered in a timely fashion.

Providing that confidence is key to economic recovery.

• Covid19.govt.nz: The Government's official Covid-19 advisory website