Treasury warns unemployment may hit 'double digits'


Finance Minister Grant Robertson talks to the Epidemic Response Committee about the Government's decision to increase minimum wage during coronavirus lockdown.

The unemployment rate could hit "double digits" as coronavirus hammers New Zealand's economy, Treasury has warned.

Finance Minister Grant Robertson says it is too early to give a firm projection on the jobless rate, but unemployment will be in excess of 6.7% - the jobless number after the Global Financial Crisis.

The rate was 4%  at the end of December last year.

Key ministers and officials in charge of the Government's response to the Covid-19 pandemic were appearing before the Epidemic Response Committee this morning.

Chaired by Opposition Leader Simon Bridges and made up of a majority of National MPs,  it grilled the Finance Minister.

Robertson told the committee that, as of yesterday, the wage subsidy has paid out $4.2 billion to 642,000 employees.

He expects it to be "well over the $5 billion mark" when the updated figures are presented to him today.

He said this is an unprecedented situation, which requires an "unprecedented response" from the Government.

"There isn't a playbook for this kind of response."

He said the Government has to move "far, far quicker than we have in the past" and that means there will be mistakes, but it is prepared to move swiftly to correct any issues.

Robertson said the Government was preparing for an economic "reset" after the lockdown is over and New Zealand goes back to a more normal way of life.

It will be, however, be a different economy.

In terms of the next steps, he said the Government was working on the small businesses sector on more support. This could include help for rent.

He warned the Government will need to manage Covid-19 for a long time after the lockdown, which meant further support for SMEs (small and medium-sized enterprises) after the lockdown may be needed.

Finance Minister Grant Robertson says Covid-19 is an unprecedented situation, which requires an ...
Finance Minister Grant Robertson says Covid-19 is an unprecedented situation, which requires an "unprecedented response" from the Government. Photo: Getty Images
Robertson said it was time to look at how this global disruption looks like for New Zealand in the long-term and that work was under way.

He admitted "many many more" New Zealanders will need access to welfare and the Government was working to update the welfare system that to make sure it was "fit for purpose".

He believed New Zealand is well-positioned to handle the coming downturn.

Government debt is much lower than that of other advanced economies. GDP will take a serious hit, as will unemployment, he admitted.

In fact, he said it would be a "quantum greater than the global financial crisis".

"For the long term prosperity of New Zealand, we need to get on top of this virus."

The minister played down any suggestions that New Zealand could come out of lockdown before the planned four-week period, saying it would be "premature" for that to happen, despite the fact the number of new Covid-19 cases has been dropping.

Robertson reiterated that employers were not allowed to compel their employees to take annual leave during the period and officials are looking at how the wage subsidy scheme might be extended if businesses continue to suffer after the lockdown.

"We have to be realistic about this, we won't save every business in the economy," Robertson said.

National's finance spokesman Paul Goldsmith said New Zealanders were "in the dark" about the economic data related to Covid-19. He called for Robertson to be more transparent with the numbers and the projections.

But he said that material was "coming together" but said the Government's focus was "getting money out the door" to people and businesses that need it.

Robertson said he "accepted the point" that data needed to be released faster than it normally would, under usual circumstances.

It was not possible to give accurate projections or forecast for employment, but he said unemployment will be in excess of 6.7% - the jobless number after the Global Financial Crisis.

Treasury will have some projections on unemployment "in the coming days".

Treasury Secretary Caralee McLiesh told the committee that Covid-19 would lead to a "very severe" impact on the economy.

Treasury was looking at a "very significant increase" in unemployment. That could be between 5% and "somewhere in the double digits".

MINIMUM WAGE RISE 

The minimum wage went up today from $17.70 to $18.90.

Robertson said most businesses had already done the work to prepare for this increase and people like supermarket workers will be benefiting from that today.

National had called for the increase to be scrapped.

Robertson said the Government would not be adjusting the wage subsidy scheme in light of the minimum wage increase.

COUNCIL RATES WARNING

Asked about commercial rent, Robertson said that was something the Government is working on "right now" and would have an announcement in the coming days.

"We are very aware that, beyond wages, this is the big issue for businesses. We have been talking to the property country to develop a package that will help us get through this."

Robertson called on all councils around the country to "think very carefully" before they put rates up. But he did not commit to telling them explicitly not to raise rates during these times.

National's Gerry Brownlee was critical of Robertson, saying he had the authority to actively direct councils not to increase rates.

ECONOMIST'S WARNING 

Economist Shamubeel Equab warned MPs that New Zealand is in economic "uncharted waters" and called on the Government to do more for businesses.

He said the Government needs to get ready for a "big increase in the welfare system".

Equab told the Epidemic Response Committee this morning that the wage subsidy schemes have been welcomed so far. But there are still many other costs, such as insurance, that businesses are still facing.

 

He said more support would be needed for businesses from the Government to cover these costs.

"We are going to see many more businesses fail… unless there are many more generous [Government] provisions."

He said with each passing day, issues are getting bigger than had previously been expected, and it was important the Government stays ahead of this.

After the lockdown ends, New Zealand will be "quite different".

"We need to be ready for a big increase in the welfare system."

He said not since the 1950s has the Government spent so much money to help the economy.

"This is going to be a very expensive recession."

Add a Comment

Local journalism matters - now more than ever

As the Covid-19 pandemic brings the world into uncharted waters, Otago Daily Times reporters and photographers continue to bring you the stories that matter. For more than 158 years our journalists have provided readers with local news you can trust. This is more important now than ever.

As advertising drops off during the pandemic, support from our readers is crucial. You can help us continue to bring you news you can trust by becoming a supporter.

Become a Supporter