The New Zealand government has splashed the cash in a bid to lessen an expected coronavirus-induced recession, unveiling a $NZ12.1 billion worth of support package.
A wage guarantee, welfare increases, an aviation industry bailout, tax relief and new health spending feature in the bumper package, equivalent to 4 per cent of GDP – double Australia’s spending per capita.
Finance Minister Grant Robertson was brutally honest about the economic turmoil to come, unveiling a new Treasury forecast that sees New Zealand slide into negative growth.
“A recession in New Zealand is now almost certain with the advice that we are receiving that the shock will be larger than that seen during the global financial crisis,” he said.
“This will affect every part of our economy, now and for some time to come.
“We are going to see New Zealanders lose their jobs and some businesses fail.
“We will have an extended period of deficits and our debt as a country will have to substantially increase.”
Mr Robertson said Treasury’s forecast was that New Zealand was heading towards a 3 per cent hit to GDP without the package, and a 1 per cent hit with it.
The stimulus is designed to improve cashflow and confidence, with three key goals.
They are to fight the virus, to cushion the blow for businesses and workers, and to position for recovery.
Around $NZ5 billion of the spending is earmarked for suffering businesses, guaranteeing a proportion of wages if the business agrees to retain their staff.
Tax relief will come in the form of deductions for new and existing commercial buildings and new assets under $5000.
Baseline welfare benefits will permanently increase by $25 a week, with extra temporary support to be supplied through the winter.
Half a billion dollars will be pumped into the health system, including a new major public health campaign.
Mr Robertson said he expected the government’s budget to be in deficit for “a number of years” owing to the spending – foreshadowing additional investment in the months to come.
Tuesday’s new spending outstrips the every new budget initiative announced by Jacinda Ardern’s government.
“We’ve gone hard with our health response, and now we’re going hard with our financial assistance,” Ms Ardern said.
The package has the support of all three government coalition partners – Labour, New Zealand First and the Greens.
Mr Robertson appealed for unity from New Zealanders as he attempts to weather an almighty economic storm.
“He Waka Eke Noa. We are all in this together,” he said.