- NZ’s 2020 Budget set out the next stages of responding and rebuilding in the wake of the COVID-19 crisis.
- A NZ$50 billion coronavirus fund was announced, but only NZ$15.9 billion of spending was allocated in the Budget.
- CAs say the government needs to move from its initial approach of universal economic support to a more targeted approach.
By Chris Niesche
Coming in the wake of New Zealand’s level four COVID-19 lockdown, the 2020 Budget handed down by Finance Minister Grant Robertson on Thursday 14 May was never going to be normal.
Robertson announced that the government will spend up to NZ$50 billion fighting the coronavirus crash, funding jobs, training and infrastructure. However, only NZ$15.9 billion of that spending was initially outlined in the Budget.
CA ANZ was pleased to see a NZ$3.2 billion extension of the Wage Subsidy Scheme, originally slated to finish in June. It will be paid to businesses and sole traders that have suffered a 50% loss of revenue in the previous 30 days.
But the Budget missed the opportunity to address NZ’s digital divide and there was limited additional support for businesses to access capital.
In the week before the Budget, we asked chartered accountants to outline where they hoped the Budget priorities would lie. And with NZ$34.1 billion still to be allocated from the coronavirus fund, there is still a possibility the government will come through with what CAs want.
Vulnerable but viable
Peter Vial FCA, New Zealand country head at Chartered Accountants Australia and New Zealand (CA ANZ), says the government has set an ambitious tone for its Budget, which is “laudable”.
He also praises the rapid initial economic response to the COVID-19 crisis, but says the Budget needs to move from its initial approach of universal economic support to a more targeted approach, focusing on those sectors which are vulnerable but still viable, “and then work with those sectors to work out what sort of support they need and how that should be delivered”.
He adds that the huge increase in government debt – needed to fund the COVID-19 support package – will have to be paid off by future generations, so any more spending must be disciplined and with more measurable outcomes. In particular, infrastructure projects should be examined with a new lens – those that were appropriate in 2019 may not be appropriate now.
The government should also look at the digital divide for individuals and communities and ensure equal access to digital services for everyone, he says. That’s especially important now, after businesses showed how agile and adaptable they were in digitising when the pandemic button was hit.
Recovery and rebuild
Larissa Logan CA, Corporate Restructuring senior manager at EY in Auckland, picks up on Robertson’s theme that this can’t be a normal Budget with 600,000 people taken out of the labour market during the shutdown.
Because the situation is changing so fast, she suggests a “staggered approach”, where Budget priorities could be revisited over the coming months
“You're looking at over the next three to six months, what can you do to keep people in work? What can you do to assist those who've lost their jobs?” she says.
“I would like to see initiatives that genuinely impact on the recovery and rebuilding of the New Zealand economy for both households and businesses – to get people working and to boost the wider economic confidence and then regenerate some of the industries hit hardest by the pandemic, such as tourism and hospitality.”
She would like to see the government maintain its infrastructure spend – despite the drain on the budget of the COVID-19 response – because of its long-term benefits for the economy. But she acknowledges this will be a challenge as the government deals with higher debt servicing costs.
“I would like to see initiatives that… boost the wider economic confidence and then regenerate some of the industries hit hardest by the pandemic.”
Climate change costs
One of the positives from the lockdown in New Zealand has been less air pollution and lower emissions, but Logan notes that this is only temporary and she would like to see an ongoing commitment in the Budget to combatting climate change. One possible policy could be more support for electric vehicles and more charging stations, she suggests.
Hawke’s Bay accountant Craig Riddiford CA, of Brown Webb Richardson, believes agriculture and primary production will play a key role in getting the economy moving again.
“We are working with a lot of primary industries down into Hawke's Bay,” he says. “Climate change has highlighted a real need for water storage, and that’s an area the government should be prioritising to put some funds into.
“I’d like to see more funding for research and development into things that are going to help reduce emissions.”
Support for business
Businesses also need better access to capital. Riddiford points out that while it’s easy to get a loan for non-productive assets such as housing, it is much more difficult to get funding for a business.
“The government could put pressure on the banks or create some way of getting capital into businesses to help them trade and get out of the business downturn,” he says.
“The government could put pressure on the banks or create some way of getting capital into businesses to help them trade and get out of the business downturn.”
James Harvey CA, an Invercargill-based partner at McCulloch + Partners, wants the Budget to focus on recovery but also resilience. He would like to see more support for small and medium enterprises, which account for about a quarter of New Zealand’s economy.
“It’s making sure that businesses receive advice from professionals, which is where us chartered accountants come into play; really forming that team approach, a lot more encouragement for businesses to set up plans and have an adviser,” he says.
Harvey would also like to see more done to encourage foreign investment and remove red tape from project consents.
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