New Zealand Moves to Alert Level 3; Govt finances remain sound

  • Apr 28, 2020 NZST
  • Team Kalkine
New Zealand Moves to Alert Level 3; Govt finances remain sound

On Monday, Prime Minister Jacinda Ardern announced that the country will move to Alert Level 3 from Level 4. After four weeks of lockdown, NZ is believed to have curbed the spread of the virus.

She said citizens should remain vigilant despite the fact that the country has evaded widespread unknown community transmission of the virus. People movement has been extended to include close relatives and care providers. However, people should continue to stay indoor except for work, school, buying essentials and exercise.

Public transport would take fewer people on board to maintain social distancing. NZ Government expects no inter-regional travel and sick people shall not use public transport. Travelling in the neighbouring area is allowed for shopping, work, exercise or school.

Mass gatherings should be avoided. For weddings and funerals, the Government has permitted up to 10 people with an expectation of social distancing measures and hygiene. People can return back home, especially the ones who have been stuck when the lockdown was initiated.

Takeaway businesses have given the nod for re-openings, but they are encouraged for contactless services. Real estate businesses are allowed to operate, and an agent can visit homes, but customers can’t visit offices.

NZ Government has also allowed construction businesses to re-open provided that strong hygiene measures are in place, and work from home should be undertaken wherever possible.

Government also believes that the risk of transmission is great at the moment. So, the services that require close contact remain closed such as hairdressers, domestic cleaners, gymnasiums etc.

Education is intended to operate remotely with online learning, and tertiary schools can re-open provided that schools operate under social distancing and small groups to de-risk the transmission.

Business support schemes by the Government

NZ Government has a Wage Subsidy Scheme for the employers that are adversely impacted by COVID-19. The scheme enables the employers to maintain the staff and employment relation with income for the employee. It is also available for sole traders and contractors.

NZ’s small and medium-sized businesses could be eligible to apply for Business Finance Guarantee Scheme. Businesses with revenue between $250k and $80 million could apply for loans up to $500k for a tenure of three-year. This scheme is 80% guaranteed by the Government, and the remaining risk is shared by the lenders. Government has also announced business cash flow and tax measures to support the businesses.

Support has been extended to M?ori communities and businesses. These packages include development, health services and business funding.

Social Development Minister, Carmel Sepuloni, stated that the Government delivered $10.4 billion wage subsidy to ensure unemployment would not spike drastically, but it is likely to rise before getting under control.

Government’s online recruitment tool would ensure that employers find suitable employees quickly and efficiently. There are 35 new employment centres across the country to provides jobs under Level 3.

Deputy Prime Minister (New Zealand) Winston Peters and Minister of Transport, Phil Twyford noted that above 1000 road and rail workers returned to work on 28 April 2020. KiwiRail has kickstarted the work on almost every project.

Works on the state highways projects are restarting around the country, and all projects are expected to return to work by Monday. Deputy PM said that the Government is building record infrastructure build up to kick start economic activity and support the workers.  

Moody’s remains upbeat on Government Finances

Moody’s has reaffirmed the NZ Government’s strong financial position to support the economy amid unprecedented times like COVID-19. Government’s financial position remains strong to support families as well as infrastructure to underpin job creation.

The rating agency has reaffirmed the Government AAA rating, allowing the Government to have lower borrowing costs. It says the Government’s low debt profile allows it to invest in the country for an economic recovery, including infrastructure, housing, education etc.

Comparatively, the country is in a strong position against the rest of the world, allowing to underpin job creation and income gains for the recovery from the COVID-19 related economic impact.

Grant Robertson, Finance Minister, stated that the Government has maintained its finances carefully for a black swan event like this. The NZ Government’s plans on skills and education, productivity, regional development and infrastructure place the cushion for a smooth recovery in economic growth.

The rating agency also noted that the Government has fiscal headroom to spend over the coming years that would underpin the economic recovery. Although this would lead to higher debt and large fiscal deficits, the Government’s commitment to fiscal management would underpin the success.

Finance Minister stated that the Government continue to build the plan for investments in infrastructure, manufacturing, regional development and digital economy for a robust recovery from the COVID-19 led economic disruptions.

In 2019, the Government debt was around 28% of the GDP, which is lower than comparable countries and below the median range of the past ten years. Although the Government debt hit a high of 37% in 2012, the Government has maintained fiscal surplus between 2016 to 2019.

 


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