WELLINGTON: New Zealand unveiled a record NZ$50 billion fund in its budget on Thursday to restore an economy hit by the coronavirus pandemic, but warned it may not be enough to stop thousands from losing jobs and businesses shutting.
The massive spending, which includes billions on infrastructure, healthcare, housing and an extension of its wage subsidy scheme, sets the stage for Prime Minister Jacinda Ardern’s re-election campaign, as her centre-left government seeks to consolidate support ahead of the September poll.
“This has been the most extraordinary budget to put together,” Finance Minister Grant Robertson said, adding “this is a situation that no one has ever been through before”.
“It’s the most significant financial commitment by a government in New Zealand’s history,” he said but warned that despite the spending boost there would still be a sharp fall in economic activity and significant rise in unemployment.
The NZ$50 billion fund will be used over a four-year forecast period, and about NZ$30 billion of it has already been allocated this year, the finance ministry said.
The spending, however, significantly widens the fiscal deficit and increases the country’s debt levels to a peak of 53.6% of GDP by 2023 and 2024, well beyond its target of 15-25% of GDP.
The operating deficit was at NZ$28.29 billion for the year ending June, plunging from a deficit of NZ$0.9 billion forecast in December.
Gross domestic product for 2020 was seen at -4.6% but gradually recovering by 2022.
Prime Minister Ardern has garnered global praise for her leadership amid the pandemic, with the country recording only 21 deaths from coronavirus, among the lowest tolls in the world.
But she faces a tough task rebooting the US$200 billion economy, which is dependent on trade and tourism, with growth expected to slow significantly and hundreds of thousands of jobs to be lost.
She eased some tough lockdown measures this week amid growing pressure from critics who said they were crippling small businesses and hurting the economy.