Budget 2020: “Far from business as usual”

On Monday the Government announced that we will be moving to Alert Level 2, today the Reserve Bank Monetary Policy Statement will be announced and, tomorrow, the Budget will be revealed. In a pre-Budget speech on 7 May, Hon Grant Robertson recognised that this will be a sobering Budget, with the original priorities “put on ice” in order to prioritise the “1-in-100 year shock” to the economy caused by COVID-19.  

The measures taken to date have provided some support for business owners and we expect to see more in the upcoming Budget as a direct response to the inevitable COVID-19 recession. In the words of  Grant Robertson, the 2020 Budget will be “far from business as usual” and will be focused on providing strong public services and next steps for the recovery and rebuilding of our economy. Stimulus will likely be targeted at sectors where economic pain has hit the hardest – tourism being an obvious candidate. The Budget is also expected to expand on the $12 billion New Zealand Upgrade Programme announced in January and the recent release by Ministers Twyford and Jones setting out pandemic control measures for infrastructure (for further detail, please visit: https://www.heskethhenry.co.nz/insights-opinion/covid-19-government-signals-major-construction-and-infrastructure-effort-for-economic-recovery/).

Areas of the Budget to watch for in relation to your business are the future of the wage subsidy, which currently expires at the end of this month. Grant Robertson has consistently said that, where possible, he prefers targeted assistance for those who need it. The Government will also be under pressure to announce additional measures to assist with business cash flow.

In light of this, we recap the key business support measures that the Government has provided to date in order to cushion the immediate blow and side effects of COVID-19: 

• Wage subsidy scheme – $585.80 (gross) per week for full time staff, $350 (gross) per week for part time staff provided certain eligibility criteria are met. So far, the Government has spent $10.6 billion and subsidised 1.7 million New Zealanders’ wages. For further detail regarding the scheme, please see here.
• Business Finance Guarantee Scheme – A $6.25 billion loan scheme available until 30 September 2020 for businesses that have an urgent need for liquidity or bridging financing caused by COVID-19 disruption. For further detail regarding the terms and conditions and credit criteria, please see here.

• Small Business Loan Scheme – Interest-free loans for eligible businesses that employ up to 50 employees for an amount up to $100,000. For further detail, please see here.

• Insolvency and company law changes – A raft of legislative changes to insolvency and company law aim to help businesses facing insolvency remain viable, effected under the Omnibus COVID-19 Response (Further Management Measures) Legislation Bill. For further detail, please see here and here.

• Tax relief measures – Tax relief for businesses experiencing a downturn in business due to COVID-19. For further detail, please see here.

We will provide further comment after the Budget announcement. In the meantime, if you have any questions about this article, please get in touch with our business advice team or your usual contact at Hesketh Henry.