Employers push for direct support for businesses worst affected by coronavirus

Prime Minister Jacinda Ardern and Finance Minister Grant Robertson met with business and union leaders about the impact of Covid-19 on Monday evening. Photo / Mark Mitchell

Business leaders are urging the Government to directly support employers hit hardest by Covid-19, in the same way that wage subsidies were offered after the Christchurch and Kaikoura earthquakes.

On Monday evening, Prime Minister Jacinda Ardern, Finance Minister Grant Robertson and Minister of Economic Development Phil Twyford met Business New Zealand chief executive Kirk Hope and Council of Trade Unions president Richard Wagstaff, along with hospitality and horticulture representatives.

Hope told the Herald that the idea of direct support for employers was raised at the meeting but, rather than nationwide, only for specific sectors in particular regions hardest hit by disruptions to supply chains and travel restrictions.

In the wake of the Christchurch and Kaikoura earthquakes, employers were offered wage subsidies for full and part-time employees, in a bid to convince them to not shed staff until conditions returned to normal.

The impact of Covid-19 had the potential to cause a prolonged downturn in some sectors and regions, Hope said.

Offering direct support to businesses could be cheaper in the long term than providing welfare payments if businesses shed staff or collapsed.

"There are two ways you can do it. Once people are out of a job you can support them, which costs a lot of money. Or you can try and ensure that the businesses stay alive, and that's probably going to cost you a bit less money," Hope said.

Business NZ chief executive Kirk Hope has raised the possibility of direct support for employers hardest hit by Covid-19. Photo / Michael Craig

"One of the things we spoke about yesterday was, 'you've got a model from Kaikoura and Christchurch for direct employer support, you've also got people who are experienced in applying that support'."

Hope's comments appeared directed in large part towards the plight of the tourism and hospitality sectors in Queenstown and Rotorua.

If businesses in New Zealand's tourism hot spots were to close, it could mean tourists do not return when international travel recovers.

"If we don't have the capacity to service these people, they'll simply go to other markets."

New Zealand's low Crown debt levels meant there was capacity to lift spending to support the economy if the Government chose to, Hope said.

"The question is how quickly they can gear up to pump money into the economy if they have to, and how much money they have to do that. Clearly, they have the capacity."

Hope believed the Government was concerned about setting a precedent with support for employers.

"They are worried about blowing a lot of taxpayer dollars."

Robertson confirmed the Government was considering the idea.

"As we're developing our scenarios I'm looking at both a sector-specific and a region-specific approach so we'll take some time to work through those.

"It's quite clear different sectors are affected quite differently here. We have the time to plan for that well, but I've certainly heard that call and we'll take some time to consider it."

The message from the meeting was that tourism sectors in Queenstown and Rotorua had seen a significant hit while Auckland and Wellington were not affected so severely, Robertson said.

Council of Trade Unions president Richard Wagstaff is understood to have raised the issue of how employees are treated during a period of self-isolation, and whether it counts as sick leave or holiday pay.

Robertson said the Government was taking advice on the matter. "That's the question, if people are self isolating as a result of a directive, how is that managed?"

National Party leader Simon Bridges said immediate tax relief for average earners was needed, as well as infrastructure spending "starting now, not in a year or two or three years' time".

Bridges wouldn't say how big the tax relief package should be.

As expectations mounted this week that the Reserve Bank may cut interest rates from the current record lows, economists have warned there is a limit to what lower interest rates can do, and that the Government needs to be ready to act to help businesses facing liquidity issues.

"The Government needs to step up. If things keep going like they are, then May [the Budget] is going to be too late," economist Cameron Bagrie said.

"The banks, the Reserve Bank and the Government need to be getting together and working out what is something sensible we can put on the table here to help businesses manage their liquidity position over the next two or three months on the assumption the economic news is going to be poor."

Infometrics economist Brad Olsen said New Zealand's low debt and now-record low borrowing costs showed the Government was in a good position to support the economy by spending. However, if it waited too long, the position may worsen.

"We're only in such a good position if we use it. If we wait and wait and wait, all that safety net may not be of any great use down the track," Olsen said.