When the Government made the hard decisions in 2020 and 2021
to put New Zealand into lockdown
it was clear that we needed to put in place broad based financial support
to help our workers and businesses get through.
Since the beginning of the pandemic almost two years ago
the government has paid out almost $23 billion in support
via the wage subsidy scheme, the resurgence support payment and the small business cashflow loan scheme.
Taking into account other related support
more than $25 billion worth of income and financial support
has been paid out since the onset of covid-19.
This has contributed to the New Zealand economy performing better
than many of the countries we compare ourselves to
and ahead of our forecasts.
Throughout the pandemic we have been monitoring our support schemes and adapting them
to fit with the changing impacts of the pandemic
and the needs of businesses and workers.
As I said back in October when we announced the traffic light system
the government has been monitoring the impact of the new framework
on businesses and the economy.
Overall activity in the economy has remained strong
as most businesses are able to operate with only limited restrictions.
This reinforces the decision not to have across the board financial support
like the wage subsidy scheme during the covid protection framework.
However, for some sectors there has been a significant decline.
The latest ReCap Retail data that we have
shows that spending on food and beverage services, art and recreation services and accomodation
all fell further compared with the same week in 2020
down 27 per cent, 47 per cent and 59 per cent respectively.
When we created the covid protection framework we were clear
that it was clear it was still possible for people to travel, eat out and go to bars
all be it, with restrictions.
It was not possible to predict how people would behave under the settings
or as omicron took hold.
A combination of the gathering restrictions particularly in hospitality
and people's behavioral responses has seen an impact
that may cause some viable businesses to cease to be able to operate
therefore we have to act.
We look closely at how best to target the support.
We have created some bespoke packages for the arts and events sectors.
However doing the same for hospitality or accommodation
runs into significant definitional and integrity issues.
In order to provide targeted support we have decided to use a revenue drop figure
that is higher than we previously had in place
and there will be declarations in place to link the revenue drop
to the impact of the covid protection framework and the spread of omicron.
A new payment has been created, the covid support payment
which is similar to the former resurgence support payment.
The covid support payment will be $4000 per business
plus $400 per full-time employee
capped at 50 FTEs or $24000.
This is the same calculation we used for the transition support payment just before Christmas.
Applications for the first payment
will open on the 28th of February
with payments starting from the 1st of March.
It will be available on a fortnightly basis for six weeks
so three payments in total.
We believe this will get people through the worst of the omicron outbreak
but as I said, we constantly monitor the situation
and we do have the option to extend this if necessary.
Like the resurgence support payment, there are criteria.
Firms must show a 40 per cent drop in 7 consecutive days
within the 6 weeks prior to the shift to Phase 2 of the omicron response on 15th February.
As before there will be exceptions for seasonal businesses.
The revenue drop test is the most effective way to target support
where it is needed most.
It captures the business within specific sectors
that are the most affected and by proxy targets
particular targets over those less affected.
The treasury estimates that the cost of each payment
will be between $160-260 million.
I'm also announcing today that we are making changes to the small business cashflow loan scheme
to increase the amount of funding available
to eligible businesses through a new top up loan.
The top up loan will allow those firms that have already accessed a loan
to draw down an additional $10,000
with a new repayment period of five years
and the first two years being interest free as they are now.
Cabinet has also agreed to remove the first two years of accrued base interest
from all borrowers who had, or would, take out a loan under the scheme.
This change will mean that interest will only start accruing at the start of year three.
These changes will come into effect in about four weeks.
Finally we are also extending Inland Revenue for tax payments
to assist firms with cash flow pressures.
This means if a business is struggling to pay it's tax in full or on time
because of covid-19 it can pay it off over time
simply by setting up an installment arrangement
in their myIR account.
Inland Revenue also has existing discretions
for providing financial relief for customers who have been unable
to pay their tax on time.
I strongly encourage businesses struggling to pay their tax
because of the impact of covid
to communicate with inland revenue
to see if they could delay starting payments to a later date
or if any part of their tax could be written off.
Inland revenue can help with both GST and provisional tax payments.
We have sufficient resources in the covid response and recovery fund
to cover the costs of these announcements.
However we have taken the precaution of topping the fund up
by $5million to cover other expenditure that is expected.
In particular to help the health response to omicron
including the purchase of vaccines
anti-viral drugs
and the ongoing support of increasing the capacity of the health system.
As previously said, the money will only be spent when it is needed.
We have the resources to do this because the economy
continues to out perform expectations
and our levels of debt remain below forecast
and relatively low compared to the rest of the world.
I want to finish by reiterating something that the Prime Minister has said.
We know from the international experience that omicron cases rise rapidly
but then hit a peak,
after around 4-6 weeks and then they drop off.
We also know that consumer demand tends to pick up very quickly.
Under our settings of the covid protection framework
people can continue to go out, shop and travel
and our reconnecting New Zealand framework
will see the borders progressively more open.
So my message to the business community is that we are providing temporary support
to get through this phase
but there is every reason to be confident that this will pass relatively quickly
and businesses will be able to operate normally as they have done for extended periods of time
over the last two years.