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More support needed to avoid rise in unemployment, NZ govt told

To avoid a scenario where a quarter of New Zealanders are out of work and GDP figures are sliding, the Government needs to provide more support for businesses and workers.

The Wellington Chamber of Commerce said the government has managed the COVID-19 Alert Level 4 well so far and have helped keep the lights on for many businesses.

But, according to the industry body, some businesses are still finding it difficult to cope with expenses while at the same time not receiving any income.

The group said the Treasury forecasts released yesterday show that there is an ongoing need to support small businesses with policies that look to assist in the medium to longer term.

“Yesterday’s forecast scenarios released by Treasury showed that with effective Government support for our business community and management of the current crisis, we can avoid a worst-case scenario where a quarter of New Zealanders are out of work and our GDP figures slide 23 per cent,” the Wellington Chamber of Commerce said.

“But the key words are ‘effective support’ and for that the Government needs to know where the pain points are.”

The business council said the wage subsidy and Government-backed loans have helped small businesses ride out the lockdown thus far, but there is a need to continue this by looking at other support mechanisms for small, local businesses.

“Immediate cash flow is the biggest issue for our members at the moment, with bills and expenses still to pay,” the group announced.

“One idea is to provide a small grants scheme similar to the one in South Australia. Their government is supporting 19,000 small businesses with a one-off $10,000 grants to help with immediate cash flow issues.”

The group also suggested the Government could follow Canada’s lead and offer interest-free loans of up to $40,000, an alternative to the Government’s Business Finance Scheme which some small businesses have difficulty accessing.

The Council of Trade Unions said the Treasury’s projections of the economic effect of the lockdown on the country are scary but useful.

“All the scenarios show severe increases in the numbers of people without paid work. Already the numbers of people needing access to benefits have increased,” said Andrea Black, CTU economist. 

Black said the longer people are without work the harder it is to return.

“That is why the government provision of a wage subsidy is so important,” she said. “But work in our pre-COVID world was one of low wages, high rents, environmental degradation, low productivity and too many people, especially Maori, excluded from a fairer society.”

According to Black, a second fiscal stimulus would have a significant impact on the numbers of people without paid work.

“It must be government investment that gets us to a place better than we were pre COVID-19.This will involve government stepping up and not leaving things to chance: investing in people and technology,” she said.

The Government’s economic think tank, the Treasury, recently released dire projections of the economic impact of the coronavirus pandemic.

The Treasury said the unemployment rate could be kept under 10 per cent if the Government comes to the table with extra financial support to help the country weather the fallout of the pandemic.

Without new support measures, however, the Treasury said the unemployment rate in New Zealand could reach as high as 13.5 per cent if the lockdown remains at four weeks.

If extended to more than four weeks, the figure could reach between 17.5 to 26 per cent.

Finance Minister Grant Robertson said he did not foresee any of these scenarios occurring and that the level of unemployment mentioned would not be acceptable to him as Minister of Finance.

He said however that the public should stick to lockdown rules so the country could emerge from the economically punishing level 4 quickly. 

The Government previously stated that it has provisioned $52 billion to cushion New Zealanders against the impacts of the coronavirus pandemic, position New Zealand for recovery and help the nation to reset and rebuild the economy to support long-term recovery.

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