New Zealand unveiled a NZ$12.1 billion (US$7.3 billion) stimulus package Tuesday as Prime Minister Jacinda Ardern raided the nation’s “rainy day” fund to soften the economic hit from the coronavirus pandemic.
Finance Minister Grant Robertson conceded “recession is almost certain” but said the package — which focuses on wage subsidies, tax breaks and a boost to healthcare — would help contain its impact.
The centre-left government said it was the largest peacetime spending spree in modern New Zealand history — the equivalent of three years’ worth of budget operational funding in one go.
Robertson likened it to a defensive tackle from the country’s famous All Blacks rugby union team.
“We are in for a fight against an outside force beyond our control that is wreaking havoc around the globe, we are up for that fight,” he told parliament.
“There is no better defensive line than the All Blacks and it is just the same with our people as we face this virus.”
Ardern said government finances were set up to include provision for emergency response.
“We’ve always been prepared for the fact that a rainy day could befall us,” she said. “As a nation, that is part of the Shaky Isles, which experiences volcanoes, extreme weather events, earthquakes.”
Market reaction to the package was positive, with the NZX 50 up 0.89 percent at 9,561.23 after days of heavy losses.
New Zealand has just eight confirmed coronavirus cases and no fatalities, for a population of nearly five million.
It has imposed strict travel restrictions, ordering all international arrivals to self isolate, in a bid to prevent the infection rates seen elsewhere.
Ardern said the stimulus package followed the same strategy of taking bold action early.
“We’ve gone hard with our health response, and now we’re going hard with our financial assistance,” she said.
Robertson said the package was just the first step in the government’s economic response, with further stimulus set to be announced in the annual budget in May.
The central bank also slashed its base rate 0.75 points to 0.25 percent on Monday.
The package announced Monday offers NZ$5.1 billion in wage subsidies for businesses hit by a virus-induced downturn, while welfare recipients will receive about NZ$2.8 billion in additional payments.
Business tax breaks total about NZ$2.8 billion and the balance going to measures such as additional healthcare and a $600 million package for the aviation industry.
Robertson said the aviation support did not include direct government subsidies for Air New Zealand, which on Monday announced it was scaling back to a skeleton operation throughout the crisis.
Kiwibank said it was an extraordinary fiscal package for extraordinary times.
“The package goes some way to backstopping business and reducing the risk of a rise in defaults… it’s good news, it’s a positive step,” the bank’s economists said in a research note.