New Zealand unveils extra stimulus – UOB

Lee Sue Ann, Economist at UOB Group, reviewed the recently announced stimulus package unveiled by New Zealand.

Key Quotes

“The New Zealand government has unveiled a NZD12.1bn support package, in a bid to lessen the impact of the global COVID-19 outbreak on the domestic economy. It includes wage subsidies, bolstering the healthcare sector’s response to the virus, more money for low-income families and those on social welfare, and changes to business tax.”

“The NZD12.1bn billion package is worth 4% of GDP, a larger plan than that implemented in response to the Global Financial Crisis and comparatively larger than relief packages announced to date in Australia, the UK and the US. This cash injection is also on top of the NZD12bn New Zealand Upgrade Programme that was announced in January.”

“Finance Minister Grant Robertson was honest about the economic turmoil to come, stating that a new Treasury forecast now sees New Zealand’s economy slide into contraction. ‘We don’t yet know what the full impact on New Zealand’s economy will be, however we do know it will cost us jobs and have a significant impact on business. We are moving quickly to help people stay in work and reduce the blow for business’, according to Robertson.”

“For now, much depends on how the COVID-19 outbreak evolves. We note that uncertainty remains high, and we do not exclude the possibility of further stimulus being announced over the coming months should the situation deteriorates. Our New Zealand’s GDP growth estimates now stand at 1.3% y/y for 1Q20, followed by 1.2% y/y in 2Q20. We have also downgraded our full-year growth outlook this year to 1.3%, down from our previous estimate of 2.4%. Risks to our forecasts, nonetheless, remain on the downside.”