The Government is sparing no expense to get New Zealand's economy ticking over again, with Budget 2020 revealing a $50 billion fund to extend the wage subsidy, provide free trades training, and boost infrastructure.
The more targeted subsidy scheme will allow companies that can show 50 percent revenue loss for the 30-day period prior to the application date compared to the same period in 2019, to access the subsidy for a further 12 weeks. This is expected to cost $3.2 billion.
The fund also covers $1.6 billion to provide free trades and apprenticeship training, $1.1 billion to get Kiwis into environment-focussed jobs, and $3.3 billion for infrastructure - that's in addition to the $12 billion infrastructure package announced earlier this year.
The mammoth fund has not all been allocated yet. Some has already been spent, with $15 billion outlined in today's 'Rebuilding Together' Budget, and $20 billion left to roll out.
Treasury forecasts up to 140,000 jobs could be saved over the next two years thanks to the fiscal stimulus, the economy could start growing again by July, with unemployment to return to 4.2 percent by 2022.
What else are we getting?
The Government is investing in areas that might not have been expected, such as the Defence Force receiving more than $1 billion, part of which will fund new Hercules aircraft since the old ones keep breaking down.
A further 8000 new public and transitional houses are to be delivered, while the struggling tourism industry gets a $400 million dollar targeted recovery fund. $900 million has been put aside to support Maori and $195 million for Pacific people.
Around 2000 students will be fed a free lunch from next year through a more than $200 million boost, while disability services will receive $800 million, and struggling tertiary students can now access a $20 million hardship grant.
Rail also gets another big investment in Budget 2020. Last year KiwiRail got a billion dollar top-up, and this year's Budget invests a further $1.2 billion into rail, and that's on top of the $1.1 billion boost in January.
And we're not forgetting about our neighbours. Aid spending has been boosted by $55 million, and Foreign Affairs Minister Winston Peters says it will focus on the Pacific, where "livelihoods have been shattered" thanks to dried up tourism.
Why is all of this necessary?
New Zealand's economy, like the rest of the world, is taking a hammering thanks to the fall-out from COVID-19, and the Government has had to drastically refocus its spending to help the country recover.
The International Monetary Fund (IMF) expects global economic activity will decline on a scale not seen since the Great Depression in the 1930s, with global growth forecast to fall to -3 percent in 2020.
GDP is forecast to decline in New Zealand from 2.8 percent in June 2019 to -4.6 percent in June this year. Meanwhile unemployment is expected to rise to 8.3 percent by the end of June, peaking at 9.8 percent in September.
Net core Crown debt is expected to reach 53.6 percent of GDP after sitting comfortably below 20 percent before the crisis. With countries like the US starting on more than 90 percent, you can only imagine how high their debt could climb.
Finance Minister Grant Robertson is optimistic the Government's huge spend-up will see the country start to recover from July.
"We are doing what it takes to cushion the blow, support businesses and workers, and position the economy for recovery," he said. "We're answering calls for significant new investment as we face up this 1-in-100 year global shock."
Robertson's prediction is in line with the IMF's forecast that global growth will rebound to 5.8 percent in 2021. But it will all largely depend on how the coronavirus is contained and whether nations experience ongoing spikes.
How does it compare to Budget 2019?
The major focus of Budget 2019 was health with $2.9 billion given to DHBs and almost $2 billion for mental health. More than a billion dollars was given to KiwiRail, while schools and hospitals also each got more than a billion dollars for infrastructure.
Here's what's already been announced:
- $160 million boost to Pharmac's budget over four years
- $203 million boost for family violence services
- $230 million early learning services package including a pay increase for teachers
- $72.5 million support package to ease the financial strain on the racing industry
- $3.92 billion package for DHBs to 'help clear the COVID-19 backlog'
What about before that?
The Government announced a $12 billion infrastructure package at the beginning of the year, called the New Zealand Upgrade Programme, with the aim of stimulating the economy through infrastructure projects.
But just a few months later, COVID-19 arrived on New Zealand's shores, and in March the Government unveiled a $12 billion support package - worth the same amount as the infrastructure investment.
As the country was moved into lockdown, the Government's spending ballooned, thanks mostly to the wage subsidy scheme, which has so far paid out almost $11 billion to about 1.7 million New Zealanders.
Up until Budget 2020, the Government had spent around $20 billion on packages related to the COVID-19 health and economic fallout.