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Coronavirus: Govt announces $12.1 billion economic stimulus package

 

The Government has announced a $12.1 billion dollar relief package to try to counter the economic impact of the coronavirus. 

"We will cushion the blow for business and workers," said Finance Minister Grant Robertson.

"The virus’ exponential spread has seen whole countries shut down in their attempts to slow and contain the spread. The result has been unprecedented economic and social disruption right across the globe."

He said a recession in New Zealand is now almost certain.

The package is one of the most significant government responses in the world, it includes: 

  • Initial $500 million boost for health
  • $5.1 billion in wage subsidies for affected businesses in all sectors and regions, available from today
  • $126 million in COVID-19 leave and self-isolation support
  • $2.8 billion income support package for our most vulnerable, including a permanent $25 per week benefit increase and a doubling of the Winter Energy Payment for 2020
  • $100 million redeployment package
  • $2.8 billion in business tax changes to free up cashflow, including a provisional tax threshold lift, the reinstatement of building depreciation and writing off interest on the late payment of tax
  • $600 million initial aviation support package

More than $5 billion will go towards a wage subsidy scheme to preserve jobs and businesses. Workplaces will get money to pay employees sick pay at $585 per week for full-time workers and $350 per week for part-time workers for those who contract Covid-19, for 14 days for those self-isolating, and for the entire period of sickness for those who contract Covid-19. 

This financial support only applies if the business has had a 30% or greater decline in revenue due to Covid-19 month-on-month for any month between January and June 2020.

There will be a $500 million boost for health: resources will nearly double for Public Health Units, specifically to increase capacity for contact tracing; $32 million for extra intensive care capacity and equipment at hospitals; 
$50 million in support for GPs and primary care, and $20 million to improve video conferencing and telehealth consultations; $20 million for more Healthline capacity.

Main benefit rates will increase by $25 a week and the Winter Energy Payment for 2020 will double.

Prime Minister Jacinda Ardern said the best protection for the economy is getting the virus under control.

“We will be investing in more health staff, more virus testing, more medicines, facemasks, extra intensive care capacity and equipment at hospitals, and more money for GPs. If we can manage the virus we can mitigate the damage to the economy.

“Today’s announcement is the first tranche of our response. Our immediate goal is to support people and businesses as we weather the impact of COVID-19. We must then ready the economy to recover."

Related:  Covid-19 and the question of recession | 'We will deport them' - David Clark on tourists who don't self-isolate | NZ’s decision to close its borders will hurt tourism but it’s the right thing to do

Since the outbreak, global trade, travel, and business and consumer spending have been cut back significantly.

Worldwide, the economic outlook is grim with fears of a recession. Markets dropped around the world today and the local sharemarket, the NZX, opened 4.3% lower as Wall Street suffered its worst day since 1987, plunging 12%. 

The Reserve Bank of New Zealand has cut the official cash rate to a record low 0.25 percent from 1 percent in response to the pandemic. 

In a statement, it said demand for the country's goods and services will be constrained, as will domestic production. Spending and investment will be subdued for an extended period while the responses to the COVID-19 virus evolve.

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