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New Zealand Finance Minister Grant Robertson promised to spend an unprecedented $ 50 billion in a bid to save jobs and reduce unemployment to pre-coronavirus levels in two years as he announced a fund for the recovery of the Covid-19 country along with its annual budget on Thursday. .
The massive figure, which is about 17% of the nation’s GDP and 17 times more than what a New Zealand government typically allocates to new spending in its budgets, was “the most significant financial commitment” that the country’s leaders had done “in modern history,” said Robertson. It highlights the challenges facing the economy as it emerges from the running of the bulls.
The spending, which includes an eight-week extension to the government’s Covid-19 wage subsidy, as well as spending on training and learning, public housing, and infrastructure, will be funded through steep long-term loans and could save 138,000 jobs under the models of the Treasure. provided by the government. But a large chunk of the new funds have yet to be allocated, with few details about some of the government’s spending plans.
The government, led by Jacinda Ardern’s Labor Party, faces an election in September and was under pressure to explain how it would preserve jobs and industries threatened by the pandemic and the resulting shutdown.
Government debt will skyrocket to 53.6% of GDP by 2023, as heavy loans finance spending. The Treasury has forecast that the government will go from a surplus to a deficit of $ 28 billion this year, with a similar deficit expected in 2021.
Economists have praised the government’s generous spending, but some fear they have ruled out long-term planning beyond the gigantic Covid-19 rescue package.
“They’ve gotten big and tough, money is flowing out the door like we’ve never seen before, it’s the right strategy to lean on the government’s balance sheet,” said economist Cameron Bagrie.
“If there is a question I have, it is that the strategy is based on hope. Covid is receiving airtime but there are many other things in the world, globalization is crumbling. What we got today was a response to Covid; what What we didn’t get was a narrative about the re-establishment and reshaping of the New Zealand economy entirely. “
Opposition leader and center-right national leader Simon Bridges called the new spending “a $ 50 billion bribery fund.”
“I am disappointed that I don’t see a plan for jobs and growth,” he said. “I see pet projects, whether it’s railroad eradication or pests, and they can be valuable, but together, they make a colossal debt.”
While Bridges said there was “a lot of good” in the budget, he criticized the government for spending less on tourism than on rail.
The Budget announcement came as New Zealand reported a third consecutive day of new Covid-19 cases and the government’s blockade restrictions on the country were further loosened, with restaurants and shops allowed to open and people allowed to socialize outside of their homes for the first time. , in groups of no more than 10.
“Today is about jobs,” Robertson said of his budget in a statement. “It is about creating new jobs and preparing people for new jobs.” He said that while unemployment is forecast to hit 9.8% in the June quarter, his stimulus package could cut the figure to 4.2% in two years, the same number of unemployed as in March this year, before the close of business. coronavirus.
The $ 50 billion fund, which is separate from the other new government operating expense in its Budget, includes $ 13.9 billion that has already been spent, including an extension of the wage subsidy scheme for struggling businesses, and $ 15.9 billion measures announced on Thursday or to be presented in the coming weeks.
Infometrics economist Brad Olsen praised the fund as “the most comprehensive investment package New Zealand has ever seen,” saying a massive crisis required an equally massive stimulus, but was cautious about how fast the country’s recovery would be. .
“We remain skeptical about the Treasury’s overly optimistic view that the economy can return to normal operating levels in two years,” Olsen said.
The amount was not accompanied by radical spending proposals; It will be primarily allocated to job creation through infrastructure, new housing and training. $ 1.1 billion has been allocated to create new nature-based jobs, including pest control and conservation maintenance. Other rail spending, and widening a school lunch program for children from low-income families, would create more jobs, Robertson said.
Robertson said this left $ 20.2 billion remaining for future expenses, including costs incurred by new outbreaks of Covid-19, which he was “optimistic” that the country had slowed down, he said.
In 2019 Robertson made global headlines for his call wellness budget, which establishes a framework for improving the lives of New Zealanders in five main areas, including child welfare, mental health and the transition to a low-carbon economy.
Faced with Covid-19’s “1 in 100 years challenge”, according to the government budget document, he was forced to “quickly [reorient]”Your spending to” focus on maintaining critical support for existing public services and supporting investment in key infrastructure. “
That meant that while the title “Wellness Budget 2020” appeared on the cover of the document, its focus was firmly on Covid-19.
“We will be able to provide [an update] when circumstances become more stable, allowing for more accurate measurement and analysis, “the document says.
The Budget itself did not include a major social welfare initiative for those who no longer had a job, but Robertson noted the government’s NZ $ 25 increase in benefits in late March, when the Covid-19 crisis began to hit the economy. from New Zealand, as evidence that the government had already supported.
The coronavirus recovery fund also included increases in funding from food banks, social service providers ($ 79 million), and grants to community groups ($ 36 million).
A total of 21 people have died from Covid-19 in New Zealand. Ardern has won praise for closing the country a month after the first case of the virus arrived and before there was any death.
