Prime Minister's pre-Budget speech
Tomorrow afternoon, Budget 2020 will be delivered within the most challenging economic conditions faced by any Government since the Great Depression.
The global COVID-19 pandemic has triggered a global economic shock not of our making, but like every country in the world, we are also not immune to its fallout.
Let me be clear, the coming months and years will be some of the most challenging our country has faced in a very, very long time.
The International Monetary Fund predicts the global economy will contract by 3% in 2020, much worse than during the global financial crisis.
Around the world, unemployment will rise, significantly.
Businesses will fail and close.
Government revenue will decline.
And we will feel the pain here too. New Zealand is about to enter a very tough winter.
But every winter is followed by spring, and if we make the right choices we can get New Zealanders back to work and our economy moving again quickly.
Today I want to set out the values that underpin our economic response to the virus and signal how we intend to tackle it.
First the best economic response to the virus was always a strong health response
Going hard and early means economic opportunities, and faster than many trading partners
I know the last seven weeks have been a huge challenge to business, which is why the first phase in our economic response has been entirely focused on assisting business to stay afloat and supporting New Zealanders to stay connected to their jobs.
I’m enormously proud of the work Finance Minister Grant Robertson and Social Development Minister Carmel Sepuloni did with the wage subsidy scheme. This nearly $11 billion dollar investment has ensured that over a million and a half workers have stayed employed and connected to their jobs during the toughest period of the lockdown, while providing a guarantee to businesses to keep going as they can start to get back on their feet at Level 2.
Sitting alongside the wage subsidy has been the largest suite of business tax changes in modern history, aimed at freeing up cash flow to support businesses when they couldn’t trade. And our no interest loan scheme provides much needed cash for things like rent and other costs as they get up and running.
These measures have worked so far. Our unemployment rate will increase, but has not spiked so far. And Treasury scenarios suggest that because we stayed at level 4 and 3 for a shorter period of time our unemployment rate could end up be at the lower end of their projected ranges.
Dealing to the virus quickly also allows other economic opportunities. A possible trans-Tasman bubble when safe could see New Zealand and Australia opening up greater tourism and trade opportunities while our borders have to stay closed to the rest of the world, offering some additional reprieve for our tourism and hospitality industries.
But the next stage in our journey of rebuilding together is recovery. Our focus now is the jobs and incomes of businesses and new Zealanders.
Budget 2020 is but the first step in this phase.
In normal years the budget sets out the Government’s economic plans for the following year in detail. This budget is different. It is not business as usual, instead it is a tailored solution to a unique situation.
There is no playbook for the recovery we are about to embark on. But nor do we need one. When it has come to COVID 19 we have carved a path based on our people, our health system, and our economy. And now that is exactly what we will do again, as we recover and rebuild.
And let me say from the outset: The team and I will bring the same determination and focus to the economic rebuild as we brought to our health response.
To start that phase, we need to consider what our objectives are and the best steps to achieve them.
The Finance Minister will set out much of this tomorrow, and I won’t pre-empt anything he has to say on that, but today I can set out what we are trying to achieve, and the values we bring to this work.
The first thing you will notice, is that we believe when times are hard, you don’t cut – you invest.
We will run the ruler over every line of expenditure, no question we need to ensure our expenditure provides value for money and supports our primary goal of jobs.
But the notion that at this time of need we would make cuts to the essential services so many New Zealanders need more than ever is not only immoral, it is economically wrong.
That’s why yesterday we made the biggest investment in health funding in two decades. It’s why on Monday we delivered pay equity for early childhood teachers. It’s why one of the first things we did when the virus hit was to increase benefit rates to ensure those who lost their job had more to help them through.
Now more than ever we need our schools and hospitals, our public houses and roads and railways. We need our police and our nurses, and we need our welfare safety net. We will not let our team of 5 million fall when the times get tough, instead we will strengthen the blanket of support the Government can provide. We are rebuilding together, not apart.
These foundations are essential. They are out base. But on top of them we must build the things that accelerate employment, empower businesses, and stimulate our productive economy. A relentless focus on jobs, economy and businesses is what’s required now for the wellbeing of all New Zealanders
Projections suggest our economic shock could be sharp, but hopefully short. That means we need a plan to get us through the worst and position us well for recovery.
The biggest fiscal asset we currently have to get us through the worst is the Government’s balance sheet. Due to our prudent economic management of the books heading into the lockdown we had debt under 20% of GDP, lower than what we inherited it at, low unemployment around 4% and a triple A foreign currency rating from Moody’s.
I defended the surpluses we ran in our first two budgets on the basis that we needed to prepare financially for a rainy day. Well that day has well and truly arrived and we are ready for it.
The Government’s ability to borrow, at very low interest rates, places us in a strong position to weather the economic storm ahead. But more than that we are well positioned to use our balance sheet to shelter New Zealanders from the worst impacts of the fallout and in doing so protect jobs and help grow our economy.
Our number one priority is jobs. That means this will be a jobs budget. That means doing all we can to support people staying in their current job or move to a new job if needed.
And the reason for that is simple. It harks back to the sentiment of Norman Kirk, that all anyone ever needs is something to do, somewhere to live, someone to love and something to hope for. Employment helps form a foundation. It supports families, pays the bills, helps provide self-value and worth and when times are tough like this workplaces can provide an important support network.
Our plan is to invest. By investing we will create jobs and get the economy moving again. Just as a rising tide lifts all boats, a growing economy supports us all – and allows us to bring the Government books back into the black.
This is not the work of just one budget. It will require relentless focus on growth and jobs, and not growth for growth sakes – but in a way that acknowledges we have challenges to our environment, to our wellbeing, that we can also use this time to also help resolve.
Tomorrow you will see how we will start to do that.
But in the same way that have fought the virus together, we also need to start our rebuild together. That will take all of us.
In the coming month the Government will launch a comprehensive engagement programme that will pose a simple proposition – look what our team of 5 million achieved together in beating the virus, now what can we do together to get our economy moving again, to look after our people, and rebuild in a way that make things better than they were before. That will of course include the business community, but it will be broader too.
If anything the last few months have shown that united we are a formidable force. When we channel our energies into a goal collectively we are stronger for it. Prior to the virus we faced serious long term challenges – persistent inequality and poverty, the threat of climate change, the need to diversify the economy, low productivity, limited domestic manufacturing and an abundance of low paid jobs. Do we return to those settings or is now the time to find a better way?
There are tough times to come, but we have experienced tough times before.
And when confronted with external crisis, be it a great depression, a world war or now a global health pandemic our instinct has been to come together.
And we will again.
We will use the strength of our economic position as a Government’s to carry the load while businesses and households get back on their feet.
The situation is constantly changing and the future may feel uncertain. But as I said right at the beginning – we have a plan. We know it will be tough but we will get through it the same way we got through the past two months – together.