The Government will spend a mammoth $50 billion on its Covid-19 recovery plan in a bid to save almost 140,000 jobs nationwide, according to this year's Budget.
It's the single biggest spending package in New Zealand's history.
But to pay for the recovery, Government debt will more than double to $200 billion and there are deficits in the tens of billions of dollars for years to come.
At the centre of today's Budget is an up to $3.2 billion eight-week extension of the wage subsidy scheme.
From June 10, businesses which have suffered, or are expecting to suffer, a 50 per cent loss of revenue, will be eligible for the scheme's extension.
Prime Minister Jacinda Ardern said there was nothing usual about Covid-19 and that meant an extraordinary response in its Budget.
"We have been a Government that, with the support and efforts of New Zealanders, took us through an enormous health challenge. And we will take the same approach to the recovery of our economy," she said.
Ardern said that work had already started.\
"But we must keep going. The times ahead will be tough. Global predictions are dire. Unemployment will rise, and growth will slow dramatically.
"We know as a trading nation that will have an impact, and it will be significant and it will be painful.
"We have never sugar-coated what the future will look like, but nor will we pretend there is nothing that we can do about it. Governments have choices, just as we did when we faced Covid-19. And those choices are between sit back and hope, or sit up and act.
"We have chosen to act," Ardern said.
There are a number of multibillion-dollar job-creation and job-saving schemes included in the Budget, as well as a massive push for training and re-training.
"Today is about jobs," Finance Minister Grant Robertson said.
"It's about creating new jobs and it's about preparing people for new jobs."
The big-ticket items in today's Budget include:
- $3.2 billion extension of the wage subsidy scheme.
- $1.2 billion railway package.
- $3 billion infrastructure investment package.
- $1.6 billion trades and training scheme.
- $220 million expansion of the school lunches initiative.
- $400 million targeted tourism support fund.
- $830 million disability support package.
"This is the most significant financial commitment by a New Zealand Government in modern history," Robertson said.
Another funding package for the media sector is also in the works, details of which are to be unveiled.
Ardern said the new spending meant New Zealand's unemployment rate could be reduced to 4.2 per cent within two years – roughly the level it's at now.
There will, however, be some pain first – the Government expects unemployment to reach 9.8 per cent in September.
To pay for the massive recovery package, the Government will borrow hundreds of billions of dollars.
Treasury forecasts show by 2024, the Government would have borrowed close to $200 billion – that's up from the current $90 billion already owed.
That figure was $65 billion just two months ago.
And it's deficits as far as the eye can see, averaging $28 billion a year over the next two years – reaching as high as $30 billion next year.
Meanwhile, GDP is forecast to drop by 4.6 per cent in the year to June.
Today's $50 billion represents the Government's total Covid-19 recovery spend – $16 billion announced today, with a further $20 billion yet to be allocated.
The remaining almost $14 billion had already been announced.
Ardern is confident the Government is right to be spending and borrowing this much money: "As a country, we saved for a rainy day for this exact reason."
She said Treasury suggested the $50 billion package could see as many as 138,000 jobs saved in the coming few months alone.
New Zealand's total level of employment is expected to rise by 234,000 over the next two years.
"We will bring the same determination and focus to jobs and the economic rebuild as we brought to our health response," Ardern said.
Although Robertson points out that many people are now back at work, many businesses will still be struggling.
He cites those in the tourism, hospitality and retail sectors – "this is why we are extending the wage subsidy scheme".
To be eligible, businesses must have had a 50 per cent hit to their revenue in the 30 days prior to their application date, compared to the same period last year.
Robertson has opened the scheme up to "high-growth firms" and research and development start-ups.
The Budget also contains an extra $1.2 billion spend on New Zealand's railways – that includes $246 million for building more tracks and $421 million for more trains.
An extra $400 million has been earmarked for replacing the Interislander ferries and fixing the ports they use.
In addition, an extra $3 billion has been made available to fund new infrastructure projects which will, according to Infrastructure Minister Shane Jones, help create many jobs.
What is also expected to create more employment is the billions of dollars being poured into trades and training.
Some $1.6 billion will be spent on a new apprenticeships programme; that's in addition to more than $300 million for additional tertiary enrolment, and $400 million to support employers to retrain and keep their apprentices.
Meanwhile, the Government's school lunches programme has been expanded significantly, receiving an almost $220 million boost.
This means the programme will be expanded from 8000 kids, to roughly 200,000 by mid-2021.
"A full stomach makes all the difference to a child's learning," Ardern said.
Almost $1 billion has been allocated specifically to Māori with a major focus on job creation.
Whānau Ora will receive a further $136 million over the next two years to continue support for communities who need it the most.
There is also $200 million earmarked to supporting Pacific peoples, which includes funding to ensure Pasifika Culture and Heritage Funds are able to continue.
As signalled by Ardern and Robertson, today's Budget is just the first step in many more announcements to come.
For example, a funding package for arts and sports will be unveiled in the coming days.
More funding for New Zealand's media sector will also be announced soon.
"There are still tough times ahead," Robertson said.
"But we have made it this far in fighting Covid-19 by drawing on every bit of who we are as New Zealanders."