Economy Hub: Recovery position – Grant Robertson on beating Delta and the path to reopening
“The NZ economy has been oneof the most robust through Covid. We’ve got unemployment down to 4 per cent. We’ve got rates of growth similar to where we were before we went in which very few countries can claim,” he says.
“So while I know its frustrating for everyone not to be able to travel overseas as freely as we have in the past the NZ economy has done pretty well”.
The Government’s plans for reopening through 2022 — laid out by the Prime Minister just days before the Delta outbreak — remain very much in place, he says.
“When Reconnecting NZ was released we were well aware that we were in a Delta environment. David Skegg even said, on the day, he thought there could be a Delta outbreak.
“I feel very confident and optimistic that we will be able to roll out that plan. We have to tweak it of course, as we learn more about Delta. That is the plan and we get there by vaccinating everyone”.
There has been no shortage of business voices bemoaning New Zealand’s Covid strategy, and taking issue with lockdown rules.
But Robertson maintains that it’s not all gloom and he’s picking up a resilient approach from businesses he meets.
“If you think back a couple of months the really big issues then were about supply issues, supply of labour, some of the global supply chain issues,” he says.
“Most businesses, that I talk to anyway, feel that we will bounce back because we’ve got the experience of last time and actually it’s those supply issues that are really on their minds even now”.
Meanwhile he says he has more than enough fiscal fire power to see us through the current outbreak.
“Absolutely. In terms of wage subsidy, resurgent support payment, those emergency economic measures that we’re taking. Yes we do.”
The Government last week passed legislation that will allow it to spend more if needed.
But this doesn’t mean they’ll need to.
ANZ economists estimate that if this additional provisioning is spent and added to the Treasury’s Half-Year Update forecast, the worst-case scenario for projected net core Crown debt to GDP would be an increase in the peak of around 5 percentage points to 55 per cent.
“Obviously if the outbreak goes on for a very extended period then we will need to top up the funding,” Robertson says.
“The good news is we’ve got plenty of fiscal headroom because the economy has been going really well over the last year or so.
“We’ve got revenue coming in ahead of where we thought we’d be. We’re trending with debt lower than we thought there would be”.
He still expects our debt will peak below 50 per cent (core crown debt) to GDP.
“The forecast in Budget took it to 48 per cent (peak in 2023). But if you take the Crown accounts to the end of May, which is the latest we’ve got, its tracking to be below that,” Robertson says.
If anything the accounts for the full half year to June 30 will look even stronger, he says.
“Before the last Budget we had a look and identified about $1 billion which had been allocated for Covid response and recovery fund that we brought back.”
In addition was around about $3bof under-utilised support funding in places like the small business cash flow scheme, the finance guarantee scheme and some of the tax breaks on offer, he says.
“All of that is now on the table to be used and is one of the reasons I’ve got real confidence. that we have the resources we need to meet those emergency economic supports.”
In terms of spending the Wage Subsidy came in at about $1.2b for the first fortnight and about half a billion for the Resurgence Support payment.
“So we’re aware that as we go on and we move through a second fortnight that we can expect similar or slightly less to come through,” Robertson says.
On Friday the Government announced that businesses facing ongoing cashflow issues will be allowed to apply for additional Resurgence payments.
If Auckland stays at alert level 4 or alert level 3 for longer that will also trigger further wage subsidies, Robertson says.
But beyond that there are no immediate plans for industry-specific payments or targeted rent support, as has been suggested by National’s Andrew Bayly.
“This is first time within alert level 4 and alert level 3 that we’ve had the Resurgence Support payment. That is the payment that is for fixed costs like rent not tied to wages,” Robertson says.
“We are in conversation with business groups around the country about whether there can be further support provided”.
“We’ve still got the small business cashflow scheme for people to borrow from as well.”
Robertson says he’s very conscious that as the outbreak goes on these costs mount for businesses.
“But also we know that the approach we’ve taken allows the New Zealand economy to come back quicker”.
Meanwhile he still has an eye on economic capacity constraint issues that are likely to be back as soon as we are out of lockdown.
Supply chain issues were global and largely outside the Government’s control, although there was ongoing dialogue with shipping companies and continued financial support for the airfreight programme.
“The issue that’s really hitting a lot of business is labour supply and that’s obviously tougher to deal with in a covid environment,” he says.
“Unfortunately that is how it has to be until we get ourselves vaccinated”.
“We’ve endeavoured to make changes around the quarantine scheme from [Pacific] Islands where there’s no Covid.
“Then we can look to see how we can look to open up more spaces in MIQ.”
A lot of business discontent has focused on longer-term policy plans for an “immigration reset” — with the expectation that means lower numbers of low-skilled immigrant workers coming in. Robertson says that remains the long-term plan.
“That is not about saying we’re turning the tap off with immigration. It’s about making sure it’s focused on the areas where we have got skill gaps that are hampering our productivity,” he says.
“Making sure we’re using immigration to really innovate and grow the economy”.
But in the short term he says the Government is very aware of business needs and intends to manage them as much as it can in the Covid environment.
He says the longer-term plan for recovery and dealing with the debt remains improving productivity and driving economic growth.
“There is never a silver bullet and I recognise I’m not the first finance minister to say I’m going to solve the productivity challenge but undoubtedly it’s the key to New Zealand’s prosperity,” he says.
He sees opportunity in the reshaping of tourism, in the development of the tech sector and agri-tech space — particularly with regards to climate change response.
“New Zealand’s climate change obligations are significant but the opportunities in areas like agri tech and through areas like using digital economy more are where we can make real gains that not only improve productivity,” he says.
It’s about creating “that impression of cutting-edge innovation that we want to leave with the rest of the world but also about meeting climate change goals”.
“That’s an area we’re focused on. We contributed the money for NZ Green Investment Finance in the Budget and I’ve committed to at least the next few Budgets [having] a real climate focus”.
The Opposition has accused Robertson of raiding the Covid fund for non-pandemic spending.
But the Finance Minister argues it is all inter-related.
The Covid Fund was always about a “mixture of the two ‘R’s” in the name, he says. “Covid Response and Recovery.
“Some of it is about a direct response like the health system, the funding for managed isolation, for vaccinations and also for things like wage subsidy,” he says.
“But some of it was about making sure that sectors affected by Covid had the resources to come out of it strong … so theatre, sports and others as well. It’s a mixture of all of that and I’m very confident that its achieving the goals we’ve set”.
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