Finance Minister Grant Robertson says New Zealand is now "well and truly" facing the worst-case economic scenario, a situation he had previously said the Government was not predicting.
His comments come just hours before he delivers a "significant" government stimulus package aimed at limiting the economic damage expected to be caused by Covid-19.
Deputy Prime Minister Winston Peters said that package "is more significant than any other package I've seen worldwide".
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Yesterday, Prime Minister Jacinda Ardern said Treasury's initial estimates show the economic damage caused by Covid-19 could be worse than the global financial crisis.
Robertson acknowledged that when talking to reporters this morning.
In late February, he outlined three economic scenarios which could unfold as a result of Covid-19.
The first was a smaller, "short, sharp" shock; the second was a longer impact likely lasting for most of 2020.
"Scenario three is one where the virus outbreak becomes a global pandemic that in turn creates a global downturn or even a global recession," he said.
But, at the time, he said the Government "was not predicting this scenario", but was planning for it.
This morning, however, Robertson said New Zealand was "well and truly" in that scenario now.
The economic spending package he will announce in a few hours would help mitigate that impact, he said.
"What this package is about is providing cash-flow and confidence to New Zealanders at this stage, as we begin to deal with the effects of Covid-19 and to look at a recovery phase."
He would not go into detail about numbers, telling reporters to wait and see.
But he said "significant" comes in other forms other than just a dollar value – "one of those is the direct impact on people's lives".
Peters was also reluctant to put a price tag on the package but said it would "fit the crisis we're facing".
"It's not excessive; it is more significant than any other package I've seen worldwide.
"But it's what we will have to do if we're to turn this thing around as fast as possible."
Regional Economic Development Minister Shane Jones told Newshub this morning that Provincial Growth Fund (PGF) money would likely be repurposed.
"A number of the projects have taken a long time to gather momentum and obviously there is no point leaving the pūtea (money) in the bank account while people are in Strugglers Gully at work," he said.