New Zealand's unemployment rate could hit "double digits" as coronavirus hammers the country's economy, Treasury has warned.
The Finance Minister says it is too early to give a firm projection on the jobless rate.
But he said unemployment will be in excess of 6.7 per cent – the jobless number after
the global financial crisis.
The rate was 4 per cent at the end of December last year.
Key ministers and officials in charge of the Government's response to the Covid-19 pandemic have appeared before the Epidemic Response Committee this morning.
Chaired by Opposition Leader Simon Bridges and made up of a majority of National MPs, is grilling Finance Minister Grant Robertson.
Robertson told the committee that, as of yesterday, the wage subsidy has paid out $4.2b to 642,000 employees.
He expects it to be "well over the $5 billion mark" when the updated figures are presented to him today.
He said this is an unprecedented situation, which requires an "unprecedented response" from the Government.
"There isn't a playbook for this kind of response".
He said the Government has to move "far, far quicker than we have in the past".
That means there will be mistakes, he said.
But the Government is prepared to move swiftly to correct any issues.
Robertson said the Government was preparing for an economic "reset" after the lockdown is over and New Zealand goes back to a more normal way of life.
It will be, however, be a different economy.
In terms of the next steps, Robertson said the Government was working on the small businesses sector on more support.
This could include help for rent.
He warned the Government will need to manage the virus for a long time after the lockdown.
That means further support for SMEs after the lockdown may be needed.
Robertson said it was time to look at how this global disruption looks like for New Zealand in the long-term.
That work, he said, was underway.
He admitted "many many more" New Zealanders will need access to welfare.
He said the Government was working to update the welfare system that to make sure it's "fit for purpose.
He said New Zealand is well-positioned to handle the coming downturn.
Government debt is much lower than that of other advanced economies.
GDP will take a serious hit, as will unemployment, he admitted.
In fact, he said it would be a "quantum greater than the global financial crisis".
"For the long term prosperity of New Zealand, we need to get on top of this virus," Robertson said.
Robertson played down any suggestions that New Zealand could come out of lockdown before the planned four week period.
He said it would be "premature" for that to happen, despite the fact the number of new Covid-19 cases has been dropping.
Robertson reiterated that employers were not allowed to compel their employees to take annual leave during the lockdown.
Robertson said officials are looking at how the wage subsidy scheme might be extended, if businesses continue to suffer after the lockdown.
"We have to be realistic about this, we won't save every business in the economy," Robertson said.
National's finance spokesman said New Zealanders were "in the dark" about the economic data related to Covid-19.
He called for Robertson to be more transparent with the numbers and the projections.
But he said that material was "coming together" but said the Government's focus was "getting money out the door" to people and businesses that need it.
Robertson said he "accepted the point" that data needed to be released faster than it normally would, under usual circumstances.
Robertson said it was not possible to give accurate projections or forecast for employment.
But he said unemployment will be in excess of 6.7 per cent – the jobless number after the global financial crisis.
Treasury will have some projections on unemployment "in the coming days".
Treasury Secretary Caralee McLiesh told the committee that Covid-19 would lead to a "very severe" impact on the economy.
Treasury was looking at a "very significant increase" in unemployment.
That could be between 5 per cent and "somewhere in the double digits".
Minimum wage rise
The minimum wage went up today from $17.70 to $18.90.
Robertson said most businesses had already done the work to prepare for this increase.
He said people like supermarket workers will be benefiting from that today.
National had called for the increase to be scrapped.
Robertson said the Government would not be adjusting the wage subsidy scheme in light of the minimum wage increase.
Council rates' warning
Asked about commercial rent, Robertson said that was something the Government is working on "right now" and would have an announcement in the coming days.
"We are very aware that, beyond wages, this is the big issue for businesses."
"We have been talking to the property country to develop a package that will help us get through this," he said, in relation to commercial rents.
Robertson called on all councils around the country to "think very carefully" before they put rates up.
But he did not commit to telling them explicitly not to raise rates during these times.
National's Gerry Brownlee was critical of Robertson, saying he had the authority to actively direct councils not to increase rates.
Economic Development Minister Phil Twyford said the economy is in a state of "enforced hibernation" in a bid to help save lives.
He said even if the alert level is only four weeks, there will be still be a "sever" impact on the economy.
"Unemployment will drop sharply," he said.
How quickly New Zealand is able to recovery will very much depend on the economy of the US, China and Europe.
Twyford said, according to MBIE, there are 750,000 workers – excluding self-employed – considered to working in an essential service.
Act Leader David Seymour said the Minister had "made a mess of this by any measure".
He said people were too confused about what shops should, and should not be open.
Economist Shamubeel Equab has warned MPs that New Zealand is in economic "uncharted waters" and has called on the Government to do more for businesses.
He has also warned that the Government needs to get ready for a "big increase in the welfare system".
Equab told the Epidemic Response Committee this morning that the wage subsidy schemes have been welcomed so far.
But there are still many other costs, such as insurance, that businesses are still facing.
He said more support would be needed for businesses from the Government to cover these costs.
"We are going to see many more businesses fail… unless there are many more generous [Government] provisions."
He said with each passing day, issues are getting bigger than had previously been expected.
He added that it was important the Government stays ahead of this.
After the lockdown, New Zealand will be "quite different".
"We need to be ready for a big increase in the welfare system."
He said not since the 1950s has the Government spent so much money to help the economy.
"This is going to be a very expensive recession," he said.
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This includes an up-to $12b wage subsidy package.
Robertson is likely to be grilled on whether the package extends far enough and what more the Government plans to do for New Zealand businesses under pressure.
This comes as New Zealand enters its seventh day of lockdown.
Also appearing in front of the committee this morning is Economic Development Minister Phil Twyford, who has been responsible for the roll-out of the Government's $600 million aviation support package.
He is expected to be asked about further support that might be needed for the sector.
This is the second day the committee has sat. Members join via video link and ask questions to those appearing before them.
Yesterday, Otago University Professor Sir David Skegg called on the Government to quarantine all people arriving in New Zealand from overseas and for a much wider testing and contact-tracing regime to prevent needless deaths from Covid-19.
He also said it was make or break time for the Government to eliminate Covid-19.
"We've got the opportunity now. Every day counts," Skegg told the committee.
"If we don't eliminate it in the next few weeks, the shutdown will continue for many months, or we will have a series of shutdowns that will paralyse our society for a year or 18 months, and it will never be the same again."