Emergency Measures: Eight Economic Responses to COVID-19 in New Zealand

This is an article I never thought I would write, but in a paper just released the Taxpayers’ Union we are calling on the Government to massively increase expenditure. This is to combat what may be the largest economic shock to New Zealand in my lifetime.

We fight for fiscal responsibility during good times, so that when events like this occur there is fuel in the tank to protect New Zealanders. The black swan has arrived.

Today, Jacinda Ardern is set to announce “the most significant package that [she] will announce while [she is] Prime Minister”. It will cost far more than the $12 billion infrastructure spend-up announced earlier this year and will represent many thousands of dollars per household. Even yesterday, the Government was still working on the details.

Here at the Taxpayers’ Union, we have been thinking carefully about how the Government should respond. We are left without a doubt that public borrowing to insulate families and businesses from the economic impact of COVID-19 is the right thing to do. But we must also plan to get back into surplus again as quickly as possible once the virus has passed, so that our debt levels return to where we can withstand external shocks such as this. 

As fiscal conservatives, it does not come naturally for us to propose massive spending increases. But protecting the citizenry during times of war and pandemic is a core role of Government. It’s why we have taxes.

Even if New Zealand can avoid the type of public health crisis Italy is facing, and Britain is warning about regarding COVID-19, the extreme measures being taken by our trading partners will see major impacts on our standards of living, livelihoods, and levels of employment in the months, or even years, to come.

Extra spending should not be permanent, but for the duration of this crisis. Any changes to tax rates, benefit levels or welfare assistance should be temporary. Similarly, the quality of spending in the months and years ahead will become even more important. But that is not the purpose of the paper we have released today. 

Broad economic relief, but targeted measures for frontline staff

We warn against targeted bailouts for favoured sectors, because it is clear that COVID-19 will affect the entire economy. But our paper’s recommendations include targeted measures for frontline staff to ensure the continuation of the public services we will need most.

In brief, our eight recommendations are:

• Provide one month of sick leave additional to existing rights for the rest of 2020, paid for by the taxpayer
  
• Use buyouts, not bailouts. Taxpayer funds paid to companies must be in return for the Crown taking a significant/majority or total shareholding. 
  
• Scrap the 2020 increase to the minimum wage – but if the Government insists on going ahead, have it meet the costs to employers for the next 18 months. 
  
• Fund unlimited childcare for health workers, aged care workers, and Police staff for the next 18 months.  
  
• Partner with Progressives, Foodstuffs and Uber to make grocery delivery free. 
  
• Give lump-sum payments by retrospectively cutting the bottom tax rate from 10.5% to 5% for the 2019/2020 tax year. 
  
• Expand “Winter Energy Payments” to begin immediately and continue for the next 12 months. 
  
• Suspend interest and penalties until the end of 2020 for late tax payments from employers.
  

Our staff will be at the announcement tomorrow and we will have analysis for you as soon as the details are released.

We welcome feedback on the paper — we are in unchartered waters.

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