How Is The NZ Government Supporting Businesses Amid Fresh COVID-19 Outbreak?

Friday, 27 August 2021, 4:35 pm
Article: Kalkine

Summary

• Amid ongoing lockdown restrictions, small businesses have experienced massive financial constraints while facing emotional strains.
• The government schemes centred around fixed cost payments and employee wage distribution have been helping to ensure businesses remain afloat.
• Some of the popular government schemes include the COVID-19 Wage subsidy, the Small Business Cashflow Loan Scheme and the Resurgence and Support Payment.

New Zealand’s virus-free run that started in February 2021 has come to an unprecedented end as infection cases spiked at the fastest rate in mid-August since April last year. As was the case with several countries, small business owners faced an unproportionate brunt of the financial slowdown. In the given scenario, the New Zealand government’s efforts to lessen the financial and emotional toll on small business owners demand closer attention.

Amid the worrying condition of surging virus cases, NZ recently dealt with another setback after the central bank decided to push back the planned interest rate rise, pointing towards a delayed economic recovery. NZ was supposed to be the first advanced economy across the world to raise interest rates in August. However, the central bank’s focus appears to have shifted towards averting any potential economic downturn amid the virus crisis. Akin to the central bank, the government is leaving no stone unturned to prevent the economy from experiencing a recession like last year.

In fact, government measures centred around small businesses have been the saving grace for many entities who have failed to secure credit from large banking facilities. Notably, stringent lending conditions coupled with the requirement of massive collateral have been some crucial factors that have aggravated the lockdown woes for small business owners.

GOOD READ: What are Small And Mid-Size Enterprise (SME)?

Having said that, let us take a closer look at three easy to access schemes rolled out by the government to aid small business owners in the pandemic-induced crisis:

Covid-19 Wage Subsidy

Open for all businesses, and self-employed individuals, the wage subsidy scheme has been reactivated for two weeks from 20 August 2021. Those qualifying through the criteria can receive NZ$600 per week for each full-time employee and NZ$359 per week for each part-time worker.

One of the main criteria that a business must fulfil to avail this subsidy includes reporting at least a 40 per cent drop in revenue because of Alert Level 4. restrictions. The scheme announced in August has been augmented with higher subsidy rates to reflect wage cost increases.

The scheme paid out NZ$484 million to businesses with over 127K applications within five days, most of which have been small traders. The wage subsidy support is expected to hold small businesses together for a while to cope with the virus crisis.

Small Business Cashflow Loan Scheme

Initially launched in May 2020, the Small Business Cashflow Loan Scheme (SBCS) has been given an extension until 2023 to ensure local businesses have enough capital to remain in business. Small businesses have often complained about the lengthy procedure of applying for a government loan. The scheme is targeted to help organisations and businesses battling with actual revenue loss due to coronavirus.

Businesses who were granted an SBCS loan before and repaid it fully before the end of 2023 are allowed to re-borrow one more time under this scheme. The condition is that the business should have experienced at least a 30 per cent decline in actual revenue due to the COVID-19 impact.

Finance Minister Grant Robertson recently indicated that NZ$2 billion worth of funds allocated to the SBCS has not yet been utilised. As the benefits of the scheme have not been completely exploited, the government may provide a further push to the cash flow scheme when economic conditions continue to pose challenges for the local businesses.

Additionally, businesses can save themselves from the hassle of fighting through red tape and secure some credit in tightening financial conditions.

Covid-19 Resurgence Support Payment

The recently introduced Resurgence Support Payment (RSP) scheme includes a one-off payment by the government to cover financial costs associated with running a business. Business owners can turn to the RSP scheme to cover rent and other fixed costs that might surface during higher alert levels.

The scheme has been given a generous push until the country returns to alert level 1 for a month. The scheme includes a core per business payment rate of NZ$1500 and an additional NZ$400 per worker for up to 50 full-time employees.

Struggling businesses can avail the scheme alongside the wage subsidy scheme. However, the qualification criteria include at least a 30 per cent decline in revenue over a week due to the ongoing restrictions. This scheme can act as a quick solution for business owners to cover fixed costs when their revenue stream remains affected by halted consumer activity.

In addition to these policies, the Leave Support Scheme has also been introduced for those individuals who cannot work from home and need to self-isolate. Businesses holding smaller capital levels can benefit from such ongoing policies by opting for a mix of different schemes that best suit their present conditions.

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