Government to spend extra $510 million as Covid-19 returns
Venkat Raman
Wellington, August 17, 2020
Finance Minister Grant Robertson has unveiled another Wage Subsidy Scheme saying that it will support people who are at the risk of losing their jobs because of the re-emergence of Covid-19.
New Zealand is now in renewed state of Alert, with Auckland, the biggest City placed under Lockdown Level 3 with movement and other restrictions.
The rest of the country is on Alert Level 2.
Nationwide applicability
The latest round of Wage Subsidy will be applicable to all eligible persons throughout New Zealand.
Mr Robertson said that making the scheme nationwide recognises the specific nature of the current outbreak and Auckland’s position in the New Zealand economy.
“Tourism operators expecting visitors from Auckland, companies that supply and trade with Auckland businesses and hospitality and retail businesses around the country are all affected by the measures to fight the virus,” he said.
Employers, including those self-employed will be able claim cash payment equivalent to two weeks pay for their full-time or part-time employees on the same formula as done over the past two Wage Subsidy payments.
The latest scheme will open on Friday, August 21, 2020 and conclude on September 21, 2020.
It is forecast to cost about $510 million and cover 470,000 jobs.
Mr Robertson also announced implementation of a simplified Leave Scheme, removing the -Revenue-Drop Test.
Supporting cashflow, confidence
“The new Wage Subsidy will help support cashflow and confidence. Along with the existing wage subsidy extension, which is open until September 1, 2020 for eligible businesses, the Treasury estimates that about 930,000 jobs will be covered by the two schemes.
“We know in New Zealand that the best economic response is a strong health response. We have seen the benefits to the economy by going hard and early to get on top of the virus, with activity in June and July running above levels seen last year as the economy reopened after lockdown and business got going again,” Mr Robertson said.
Eligibility criteria
The criteria for the new wage subsidy are similar to the current extension: In particular, a business must have had, or is predicting to have, a revenue drop due to Covid-19 of at least 40%. For the new scheme, the revenue drop will apply for any consecutive period of at least 14 days within August 12 and September 10, 2020, compared to the same period last year.
The Treasury also estimates that a number of businesses that were not able to access the extended wage subsidy before it expires on September 1, 2020, will now become eligible to do so. This is expected to cover about 460,000 workers, at $1.1 billion.
Strong health response
Mr Robertson said that the ‘Revenue-Drop’ had impacted negatively for Covid-19 Leave Support Scheme and hence has been removed.
Therefore, businesses with workers who have been told by health officials or their medical practitioner to self-isolate will receive the equivalent of the Wage Subsidy to help cover that person’s wages for the time they cannot be at work.
“Our focus is on doing everything we can to support our strong public health response. That means removing barriers to a person getting tested, including fears that a positive result would put their employment at risk or that they would not receive income while they could not work because they had used up their sick leave,” Mr Robertson said.
Mortgage Deferral extended
He also announced that the Mortgage Deferral Scheme, which had currency until September 27, 2020, has been extended up to March 31, 2020. Further details will be made available by the Reserve Bank and the retail banks.
Mr Robertson also confirmed that further work is being done to ensure support continues to be adaptable and flexible for alert level movements. This includes work on the Small Business Cashflow Loan Scheme and potential further changes to the Leave Support Scheme.
“At the same time as putting these measures in place to cushion the blow, we are continuing to roll out our comprehensive recovery and rebuild plan around New Zealand by investing in training, creating jobs through infrastructure investment and supporting businesses through the tax system,” he said.
