Coronavirus: Finance minister warns NZ economy now bracing for a year of hits

The impact of Coronavirus on the economy is likely to last longer than previously expected, Finance Minister Grant Robertson warns.

The Government had been planning for three economic scenarios and was now moving into the second phase, where the impacts of Covid-19 will be felt for a year, Robertson said.

An economic advisory group led by the Treasury, and which included the Reserve Bank and MBIE, had assessed the scenarios.

The first predicted a temporary global demand shock across the first half of 2020, before growth rebounded in the second half when exports returned to normal. The second is based on a longer-lasting shock with global impact feeding through to the economy for the rest of 2020. 

The third scenario plans on how to respond to a global downturn if the worst case, a global pandemic, plays out.

As a result, authorities such as MSD and IRD are now stepping up their work for the second phase. Robertson said he expected a ramping up of all Government activity, along with potential sector and regional interventions, which were currently being worked on.

It is understood the IRD have spoken to more than 200 businesses about tax issues in relation to Covid-19.

During Question Time, Robertson told the House the planning meant the Government could act swiftly and decisively as the effects of the coronavirus were felt on the global and domestic economy.

"We are moving to the phase where the impacts are felt over the year - clearly the first quarter of growth will not be great. We know that because of the impact on the tourism sector and forestry… What we are now seeing with the spread of the virus to other countries, is the impact on the economy is likely to last longer," Robertson said.

He encouraged business owners to make plans on how to get through it, and reassured them they would.

"The economy was robust and resilient but clearly we are entering a difficult period for a number of businesses and that is why we are working with them."

He urged banks and their clients in particular to develop a plan to see them through.

Small-business owners in the hospitality, forestry, and tourism sectors had sought an assurance that Government agencies were on the ground with them, he told the House.

The industries had also wanted further information about leave and leave provisions, which the Government was working on.

The Government's economic plan and policies had put New Zealand in a strong position to respond to Covid-19, Robertson said.

"We need to continue to implement those policies in this period of uncertainty. We're working closely with affected businesses, employers, and workers. We're focused on protecting jobs and supporting businesses and affected industries—for instance, the tourism sector and through the Regional Business Partner programme."

Prime Minister Jacinda Ardern told the House the economy was obviously moving into a different phase.

"There is going to be a period of global impact on the global economy and time will tell what that will look like in New Zealand. But as I said, we are well prepared for what is coming our way."