New Zealand announces $7.3 bn package to boost economy as recession fear looms large

New Zealand on March 17, announced that it would pump $7.31 billion into the economy. According to reports, the amount is equal to 4 per cent of New Zealand’s Gross Domestic Product (GDP). This announcement was made in order to slow a contraction expected from the business disruptions caused by the coronavirus outbreak.

Economy severely hit

According to reports, Finance Minister Grant Robertson in a news conference said that the proposed amount was larger than the one that was implemented during the global financial crisis and added that it was larger in terms of GDP percentage to packages offered by other countries like Australia and Singapore.

Robertson added that the government was still unsure of the extent of damage the virus would have on New Zealand’s economy but they were certain that it would cost New Zealand jobs and have a rather significant impact on business. Robertson claimed that without the package, the Treasury Department was predicting a contraction of 3 per cent in the first quarter of 2021 as opposed to 1 per cent with the package.

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As per reports, New Zealand Prime Minister Jacinda Ardern has claimed that the economic impact of the coronavirus will be worse than the global financial crisis and cancelled all big public gatherings as well as imposed mandatory self-isolation for visitors. Reports indicate that the package includes an initial NZ$500 million boost for health services, NZ$5.1 billion in wage subsidy support and NZ$2.8 billion in income support.

The package also wants to free up cash flow by providing an NZ$2.8 billion in business tax change. This will include a provisional tax threshold lift, the reinstatement of building depreciation and writing off interest on the late payment of tax. According to reports, Robertson has said in a speech to parliament that recession was ‘almost certain’ in New Zealand and he added that New Zealand will face an extended period of deficits.

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