Robertson is confident about the benefits of spending – but what’s the story about the downside from borrowing?

So is the government succeeding in steering the country through the Covid-19 crisis and what it calls a “one-in-100-year shock”. And just what is it costing?

These are questions which will be uppermost in the minds of voters when they cast their ballots in next month’s general election.

Finance Minister Grant Robertson in Parliament this week assured the nation it is weathering the immediate impacts of Covid-19 “better than expected” — even though the full impact is yet to be felt.

He reckons the employment data this week shows the government’s plan to protect jobs and cushion the blow for businesses and households has protected the labour market from the worst effects of Covid-19.

According to Statistics NZ, the unemployment rate here ranks at seventh in the OECD, better than the OECD average of 8.4% and well ahead of Australia (7%) and the US and Canada (both at 13%).

Furthermore, the employment rate of 76.8% is currently fifth in the OECD, well above the average of 68.6%.

This shows that unlike what we are seeing in many countries, the government’s decision to go hard and early, and put the wage subsidy in place quickly while getting on top of the virus, was the right approach. The best economic approach was always going to be a strong public health approach, and this is bearing out in terms of our comparison with the rest of the world”.

Robertson reports the Treasury expects unemployment to rise further and peak in the September quarter, as the impacts of the global recession caused by Covid-19 feed through to the domestic economy. Many countries are now experiencing second waves, which will lead to a deeper global recession.

He says as part of the economic plan announced at Budget 2020, the government is making significant investments to support New Zealanders into jobs, including free trades training to help them get into work; providing businesses with up to $16,000 to help cover the costs of an apprentice’s first two years; boosts to He Poutama Rangatahi, Mana in Mahi, trades academies, careers advice and the new Māori apprenticeships fund; significant new infrastructure investment, including for 8,000 new State houses and regional infrastructure projects; and support for small to medium-sized enterprises to receive up to $5,000 for business advice and support them to shift into e-commerce.

The Government has a comprehensive economic plan to see Kiwi workers and businesses through the crisis, and we have made the critical investments to back that up”.

Questioned what Treasury is telling him about its latest projections for the job losses following the end of the wage subsidy, Robertson says while Treasury has not yet updated the formal forecasts that were in the Budget, by the December quarter there could be 246,000 people unemployed.

I do, however, note that with the release from Statistics NZ, at this equivalent point, Treasury were forecasting 222,000 people unemployed, and, in fact, it’s 111,000”.

National’s Finance spokesman Paul Goldsmith then asked the extent of fiscal and economic stimulus during the June quarter, including Treasury’s best estimate of the stimulus since then.

Robertson pointed out fiscal and economic stimulus comes from a range of sources in terms of the government, but also the wider economy.

In terms of monetary policy, in March the Reserve Bank lowered the official cash rate from 1% to 0.25% and committed to keep it there for at least a year. The Reserve Bank is also keeping long-term interest rates down by buying up to $60bn of NZ Government bonds, NZ Local Government Funding Agency bonds, and NZ Government inflation-indexed bonds in the secondary market. It’s also announced the total size of its large-scale asset purchases programme is $60bn over the next 12 months. To date, it has repurchased about $22bn of these bonds on the secondary market.

“ In terms of fiscal stimulus, according to the Treasury’s monthly Crown accounts, total Crown expenses in April and May were $30.286bn. In terms of the month of June, the government accounts for June and July and the first 5½ days of August have not yet been finalised. But the Treasury estimates that Crown expenses would be about $30.792 billion across June and July”.

Robertson is convinced the stimulus that’s gone into the economy is the very thing that has ensured New Zealanders have been able to stay in work and the government has been able to support small businesses.

It’s very important that the government continues to take the attitude of supporting New Zealanders, not heading down a path of austerity”.

This support – according to the 2020 Budget and Fiscal Update in May – in the current year and the next two fiscal years was resulting in projected operating deficits (operating balance before gains and losses) averaging around $28 billion, while net core Crown debt was expected to increase on average by around $32 billion a year. The operating deficits and increases in net core Crown debt started to fall from 2022/23.

Robertson rejects Goldsmith’s view that the historically unprecedented level of stimulus has so far masked the true economic consequences of Covid-19 or that the 67,000 additional New Zealanders who have gone on to unemployment support since March know those consequences only too well.

If that means a government that actually is prepared to stand alongside New Zealanders, help them stay in work, help them put food on the table, help them support their families and their communities, then the wage subsidy scheme worked, in that regard….

“Quite clearly in a Budget that included $15bn of new spending designed over the forecast period to help create 300,000 jobs is a good start, in that regard”.

Yep. Lots of new spending.

Nothing to worry about, then.

Even if the figures on borrowing are mind-boggling.

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