The Government’s support for businesses and jobs continues to roll out at pace, with payments of the new wage subsidy already in nearly 50,000 business bank accounts.
Finance Minister Grant Robertson said the Government is standing beside businesses and households to cushion the blow of the 1-in-100 year shock caused by the global COVID-19 pandemic.
“We know from experience in New Zealand that the best economic response to COVID-19 is a strong public health response. Economic activity in June and July was higher than the same months last year, which shows how important it is to go hard and early against this virus, stamp it out and then safely re-open the economy,” Grant Robertson said.
“Moves to keep New Zealanders safe from the virus do have an impact on business. That’s why we’ve moved early to support businesses and households by getting payments into bank accounts quickly to boost cashflow, manage costs and pay wages.”
The Government’s new wage subsidy to support businesses under the latest Level 3 restrictions opened for applications last Friday. It is already getting support into the economy, with $167.5 million paid to 46,920 businesses, protecting 156,741 jobs.
Social Development Minister Carmel Sepuloni said MSD continues to support business confidence and cash flow by processing applications at pace.
She said the existing extended wage subsidy has also seen an increase in applications, with more than 24,366 businesses being approved since August 12 as they became eligible for this eight week payment.
“The latest two-week wage subsidy brings the total time covered by the wage subsidies to 22 weeks. A business that was eligible for the full 22 weeks will have received total cash grants of $12,887.60 per full time worker, meaning payments worth more than $128,000 for a business with 10 full time workers, payments over $322,000 for a business with 25 staff and over $515,000 for a business with 40 staff.”
New Zealand has been at Alert Levels 3 and 4 for seven weeks of that 22 week period, with Auckland at just over nine weeks. In total, the wage subsidies and leave support schemes have paid out more than $13.6 billion to businesses to support them for nearly half a year.
“Before COVID when we were reducing debt below 20% of GDP, people were calling on us to spend more. But we stood by our plan of making sure the books were in a strong position because in New Zealand we don’t know what might be around the corner for the global economy, or the natural disaster risk we face.”
Grant Robertson said the Government is mindful of concerns that New Zealanders and business leaders have about the levels of debt required to make these significant payments, while also making sure public services like health are properly funded during the pandemic.
“People know that every request for extra support represents another dollar that has to be borrowed. My focus on keeping debt under control is why we analyse each request for the Government to increase borrowing extremely carefully.”
The Government’s support for businesses through the tax system is also rolling out, with the Small Business Cashflow Loan Scheme now supporting nearly 100,000 SMEs, Revenue and Small Business Minister Stuart Nash said.
“These loans are interest-free for a year and are a cheap source of working capital for firms who find themselves in a tight spot. They have proven to be a popular and fast way to access finance. Many businesses have also started repaying their loans as the economy opens up, with 3,585 SMEs repaying $15.6 million so far.
“A second initiative to get cash out the door to businesses through tax refunds has also now passed the 2,000 recipient mark, with $110.8 million of tax refunded under the tax loss carry back scheme.”
About 92% of these businesses have fewer than 20 staff, but very large firms with more than 200 staff, have also taken advantage of the refunds, Stuart Nash said.
“The Government’s decision to allow IRD to waive interest on late tax filings has also helped 44,698 businesses. About $4.3 million of interest has been written off to allow for late payments, giving business owners the space and time to deal with the effects COVID-19 has had on them running their business and managing the books.”
Original 12-week wage subsidy:
396,751 businesses – 1,653,659 jobs (1,428,214 employees and 225,445 self-employed) – $10.94 billion.
Top five sectors
- Construction: $1.4 billion protecting 203,000 jobs
- Manufacturing: $1.2 billion protecting 170,000 jobs
- Accommodation and food services: $1.0 billion protecting 164,000 jobs
- Retail trade: $1.0 billion protecting 156,000 jobs
- Professional, scientific and technical services: $869 million protecting 129,000 jobs
Top five regions
- Auckland: $3.5 billion, protecting 528,000 jobs
- Canterbury: $1.3 billion, protecting 197,000 jobs
- Wellington: $859 million, protecting 131,000 jobs
- Waikato: $853 million, protecting 129,000 jobs
- Bay of Plenty: $583 million, protecting 88,000 jobs
Extended eight-week wage subsidy – as at 26 August:
176,600 businesses – 545,400 jobs (441,965 employees and 103,435 self-employed) – $2.4 billion
Top five sectors – as at 21 August
- Accommodation and food services: $317 million, protecting 76,000 jobs
- Construction: $301 million, protecting 66,000 jobs
- Manufacturing: $209 million, protecting 46,000 jobs
- Professional, scientific and technical services: $157 million, protecting 35,000 jobs
- Administrative and support services: $148 million, protecting 34,000 jobs
Top five regions – as at 21 August
- Auckland: $824 million, protecting 188,000 jobs
- Canterbury: $254 million, protecting 59,000 jobs
- Wellington: $156 million, protecting 36,000 jobs
- Waikato: $142 million, protecting 33,000 jobs
- Otago: $104 million, protecting 24,000 jobs
New two-week resurgence wage subsidy – as at 26 August:
46,920 businesses – 156,741 jobs (130,351 employees and 26,390 self-employed) – $167.5 million. (Industry and regional breakdowns are not yet available.)
Small Business Cashflow Loan Scheme – as at 27 August:
- 93,598 SMEs have received loans, which are interest-free for a year
- Loans worth $1.54 billion approved
- Average loan amount approved is $16,500
- 3,585 SMEs have made repayments worth $15.6 million
- 41% of all loans have gone to SMEs in Auckland; 12% to Christchurch; 9% to Wellington; 7% to Hamilton; 5% to Tauranga
- 81% of loans have gone to SMEs with one to five staff
Support through the tax system:
- $110.8 million of tax refunds paid to 2,136 businesses under tax loss carry back scheme (at 25 August)
- 44,698 businesses have had $4.28m of interest written off to allow them to make late tax payments (at 24 August)
- Further support is also available through the Government’s moves to increase the threshold for low-value asset write-offs, restore building depreciation, increase the provisional tax threshold to $5,000, bring forward broader R&D refundability and allow greater access to the in-work tax credit.