Coronavirus: Billions to fight infection and election in New Zealand

A $NZ50bn ($46.5bn) fund to combat COVID-19 will push Kiwi debt to record levels but give Jacinda Ardern a sizeable election war chest.

Jacinda Ardern enters parliament in Wellington with Deputy Prime Minister Winston Peters on Thursday. Picture: AP

A $NZ50bn ($46.5bn) fund to combat COVID-19 will push New Zealand’s debt to record levels but give Jacinda Ardern’s government a sizeable war chest to fight the planned election in September.

The new fund is the centrepiece of a budget announced on Thursday under which New Zealand’s net debt will rise to more than 50 per cent of GDP in 2023 and 2024, more than double pre-COVID-19 levels.

The Labour leader said the budget was not business as usual but “a response to the rainy day we have planned for” and the pandemic had changed the government’s immediate focus to employment but not its priorities for the future.

Big-spending plans were announced for public housing and environmental repair. “There are few things now I will ever consider to be outside the bounds of possibility,” Ms Ardern said.

She said now was not the time to argue about who should be holding the policy umbrella sheltering New Zealanders from the COVID-19 storm.

Opposition Leader Simon Bridges said with 1000 New Zealanders a day joining the dole queues, the Ardern government had missed an opportunity.

The COVID-19 fund, he said, was going to be “a $NZ50bn slush fund” that would leave “over $NZ20bn to spray prior to election 2020”.

“Having gone hard and early on lockdown, we have gone soft and slow on the economy”, the National Party leader said. “We should have opened up the economy sooner to get New Zealand working again.”

Mr Bridges said debt would total $NZ80,000 a household.

Finance Minister Grant Robertson told parliament in Wellington that only $NZ15.9bn of the new COVID-19 fund had been allocated but he denied the extra funds represented an election-year “slush fund”. He said the balance of the $NZ50bn fund would be spent over the four-year budget horizon “as necessary and as need arises … It will be a roving mall of initiatives.”

Key budget measures included extending a wage subsidy scheme for a further eight weeks at a cost of $NZ3.2bn. Infrastructure spending of $NZ3bn will include investment in 8000 new public homes.

A further $NZ1.6bn has been allocated to trades and apprenticeship training and a new $NZ1.1bn environment package was to fund jobs working on practical projects to restore waterways and improve environmental health.

Mr Robertson said the budget was “the most significant commitment by a New Zealand government in the nation’s history”.

In his budget reply address, Mr Bridges said he could not see a plan for jobs and growth. “I see pet projects whether rail or pest eradication,” he said. “Added up, they mean colossal debt and don’t create sustainable jobs for workers from small to large business.”

Mr Robertson said there was “no sugar-coating the impact this crisis has had on the government’s books”. Treasury’s forecasts in the budget are for New Zealand’s real GDP growth rate to decline from 2.8 per cent in the year ending June 2019 to minus 4.6 per cent in the year ending June 2020.

This is driven by a quarterly decline in GDP of more than 20 per cent in the June 2020 quarter. The budget forecasts annual average GDP growth to return to positive from the year ending September 2021. Unemployment is forecast to rise significantly, to 8.3 per cent in the year ending June 2020, peaking at 9.8 per cent in September 2020 and recovering thereafter.