Level 3 cost will be ‘significant’
Finance Minister Grant Robertson says he's looking at every support scheme on the Government's books to help cushion the blow of extended Level 3 restrictions in Auckland
Wage subsidies will be extended nationwide as the effects of Auckland's Level 3 restrictions ripple across the country.
However, questions are being asked about why more time is needed to roll out a support package.
Robertson didn't downplay the impact a Cabinet decision to extend Auckland's movement restrictions at Level 3 would have on the city's economy, but said the cost of a full-blown outbreak would far exceed that.
Estimates on how much a lockdown of 12 days could cost the Auckland economy ranged from $400m to $700m.
"We were very clear that this was a significant impact," Robertson said.
"What I don't think this takes into account however is that flow-on impact to other parts of New Zealand as well."
BusinessNZ chief executive Kirk Hope said the extension of the wage subsidy nationwide was also a recognition Level 2 restrictions had a major cost for other parts of the country too.
Especially for businesses that relied on a lot of foot traffic.
"There is quite a lot of impact for businesses even at Level 2.
"In Wellington you have social distancing on trains, buses and public transport so people say 'I'll work from home'.
"That certainly has an impact on CBD businesses."
On Friday afternoon Cabinet agreed "in principle" to an extension of the wage subsidy along with a mortgage deferral scheme for homeowners.
"Why was this not ready to go? Certainly the health response was prepared for a second outbreak of Covid-19, but it seems like the economic support wasn't necessarily ready to be rolled out immediately. Which I find a little bit surprising,"
Robertson said the cost of an extension of the wage subsidy would come in at under $1b.
Exact details behind that and other forms of income support would be hashed out jointly by Robertson and Social Development Minister Carmel Sepuloni over the weekend.
The wage subsidy scheme would take a maximum of five days to roll out once it was fully approved by Cabinet.
"Obviously there have been support schemes in place already so people have already built up a certain reservoir," Robertson said.
"Also I think the fact that we did come back quicker, that actually most businesses were generating more revenue than they thought they would all gives me the confidence that they can do the scheme this way."
'Why was this not ready to go?'
Given the inevitability of a small-scale outbreak - and potential regional lockdowns to contain it - Infometrics economist Brad Olsen said he was surprised there was still work to do on a potential economic assistance package.
The wage subsidy scheme - an already existing scheme - would need to be discussed for two days followed by a roll-out through the Ministry of Social Development of up to five days.
"Why was this not ready to go? Certainly the health response was prepared for a second outbreak of Covid-19, but it seems like the economic support wasn't necessarily ready to be rolled out immediately. Which I find a little bit surprising," Olsen said.
The extension of Level 3 would also have an outsized impact on Auckland's economy even if there were impacts elsewhere.
"We've got to realise that having 38 percent of New Zealand's economy under Level 3 restrictions is particularly harsh.
"For the likes of Auckland that could be 28 percent, or 250,000 workers that can't operate like normal for the next few weeks."
More targeted assistance for Auckland should have been considered even if there were economic effects further afield.
"If I'm an Auckland business I'm going to feel a little bit aggrieved that I'm lumped in with the rest of the country at Level 2. The differences are considerable," Olsen said.
Wage subsidies and mortgage deferrals wouldn't be the only policies under review.
Robertson said all "support policies" would be looked at, but specifically mentioned the Small Business Cashflow Loan Scheme as one that would be discussed.
The scheme is administered by the Inland Revenue Department and allows businesses with fewer than 50 staff to take out a one-year interest-free loan up to a maximum of $100,000.
Hope said changes to the scheme might be needed to help businesses meet their costs during Levels 2 and 3. That could include extending the interest-free period out for more than a year.
With all these measures, did businesses have enough of a buffer to handle the economic effects of 12 weeks at Levels 3 and 2?
"Maybe," Hope replied.
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