Stimulus package just the beginning

A109 Light Utility Helicopter flight with mayor Gisborne City from the air in November 2023.

Opinion

The economic stimulus package announced by Finance Minister Grant Robertson yesterday to address the impacts of Covid-19 is massive, totalling $12.1 billion or about 4 percent of national GDP — yet it is only the start.

Commentators who have almost universally welcomed the package say that, and the Minister made clear this was a starting point for government support in an evolving situation. Robertson committed to significant further spending in a “recovery” Budget due on May 14, including working capital assistance for small and medium businesses, and targeted support for larger and more complex businesses.

While yesterday's announcements might be too late for some local forestry firms, and the Government acknowledges that many jobs will still be lost despite this new spending, the good news is that significant support is now available.

Cash from the $5.1bn of wage subsidies, and $2.8bn for benefit increases and a boost to the winter energy payment, will start flowing very soon to those in need and on into the economy over the next few months. A further $126m will be provided for Covid-19 leave and self-isolation support for employees and the self-employed.

Opposition leader Simon Bridges has been panned for criticising the permanent nature of the $25 a week rise in benefits, saying this “ideological” move was prioritised over support for medium-sized Kiwi businesses. While there are very good reasons to lift benefit entitlements, it is a fair call to say an emergency package should focus on addressing the emergency.

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On the critical health sector-response front, a $500m fund has been announced to increase intensive care capacity and equipment, support GPs and primary health providers, and for telehealth consultations. The now-inundated Healthline service will receive a further $20m to hire more staff.

The aviation sector gets $600m of support, and that is without factoring in a package the Government is working through separately with Air New Zealand, which has announced it is laying off up to a third of its staff.

A number of tax changes were also announced yesterday that are intended to help businesses with cashflow issues and to stimulate investment, at a cost to the government of $2.8bn. They include new depreciation rules, doubling the provisional tax threshold to $5000, and wiping interest on late tax payments for businesses affected by Covid-19.