Rebuilding together

Budget Response 

 

Heath Milne | DWC Chief Executive | 15 May 2020

The Budget announcement by Minister of Finance Hon Grant Robertson is largely positive for the West Coast business community, but it will not solve all of the current and pending economic issues we face.

On the Coast, we are already experiencing a significant impact from the COVID-19 crisis with businesses closing and our unemployment rate rising to 7.5 percent. The full extent of the economic fall-out is yet to come, so against this backdrop the 2020 ‘Rebuilding Together’ Budget can be seen as a positive ‘first’ step towards recovery for the Country and our region.

The shift to Level 2 has been great news for the Coast. It has meant more of our businesses are open again, but we must acknowledge that it will be quite some time before business returns to normal.

We will require support from central Government to see us through this challenging time, so we are pleased to see an emphasis on business recovery in the Budget through targeted expenditure.

$3.2 billion extension of the wage subsidy scheme.

One of the most significant announcements in the Budget was the $3.2b extension of the wage subsidy scheme.

The Government’s wage subsidy scheme has been a lifesaver for many businesses on the Coast. The shift to Level 2 has seen more businesses reopen their doors, but there are various new challenges - changes in demand and consumer behaviour, and new social distancing regulations. As a result, an extension to the wage subsidy was needed.

The additional $3.2b will be more tightly targeted, with only businesses that have experienced or are forecasting a 50 percent drop in revenue eligible for the eight-week extension.

This will provide much needed relief for many businesses across our diverse sectors – particularly those linked to the tourism industry.

More than half of all tourist spending on the Coast comes from international visitors, so with the collapse of that market segment it is likely that most of our tourism operators as well as those in the retail and food services sectors will meet the new criteria for the wage subsidy extension.

But again, it is limited and will end in September unless further extensions are given. To remain viable in the foreseeable future, tourism businesses will have to use the breathing space the subsidy provides to try to reposition themselves and pivot towards the domestic market where possible.

$400 million targeted tourism support fund.

The closure of New Zealand’s borders to international visitors has hit the Coast hard. Tourists inject half a billion dollars a year into our region - $271m of that comes from international visitors.

In that respect, the $400m allocated by the Government for targeted tourism support for the whole country is just a drop in the bucket. However, Minister of Tourism Hon Kelvin Davis has stated that this fund is just the start, and additional support will be rolled out over the coming months.

At the moment, details of how the $400m will be spent are quite vague. Some will be allocated to a ‘Transitions programme’ to provide advice and guidance for businesses on how to hibernate or redesign their business for the domestic or Australian market. DWC has already been working in this space, including hosting a webinar on how to hibernate your business. We have been advised that tourism businesses can ‘register their interest’ for the Transitions programme via the MBIE website.

A ‘Strategic Tourism Asset programme” will provide bespoke support for businesses that have a positive flow on effect to the wider community. The example given by Minister Davis was Whalewatch Kaikoura. How these businesses will be assessed and what the bespoke support will look like is not clear. Again, businesses can register their interest via the MBIE website.

Other parts of the package include setting up a Ministerial Tourism Recovery Group made up of Minister Davis, Eugenie Sage and Fletcher Tabuteau along with a taskforce to look at the future of tourism.

Tourism NZ will now focus on domestic marketing; however, details of the campaign are again difficult to obtain at the moment.

Next week we will be hosting Minister Davis for a webinar on ‘restarting regional tourism’. It will present a great opportunity for our tourism operators to ask questions so we can gain a better insight on how this package may help the West Coast.

$1.6 billion trades and training scheme.

The Government has announced that apprenticeships and vocational courses in ‘critical industries’ will be made free over the next two years for everyone.

This is particularly good news for the West Coast, as our region has one of the highest rates of 15-24 year olds ‘not employed or engaged in education or training’ (NEET). Our NEET rate is 15 percent, compared to the national average of 12 percent.

To build a robust economy for the future we need an educated and skilled workforce, so any additional funding for apprenticeships and vocational courses made available to the Coast will help our region going forward and will help overcome our existing staff shortages in the trades.

$19.3 million to place 10,000 people into primary sector jobs.

The Government has also allocated $19.3 million over four years to help recently unemployed people retrain and find jobs in the primary industries. The aim is to place at least 10,000 people nationally in jobs in the intermediate term.

The West Coast economy has traditionally relied on the backbone of a strong primary sector. The primary sector contributes 23.4% of our GDP and provides 14.2% of our jobs.

Many farmers on the Coast struggle to find workers, so this initiative has the potential to support growth for our region by attracting workers to this highly productive sector. On the West Coast Agriculture, Forestry and Fishing jobs add an average of around $164,000 to our GDP – so any growth here will benefit the whole region.

$1.1 billion for restoring the environment.

Almost $1.1 billion from the Budget will be put towards restoring the environment with the Government expecting to create about 11,000 jobs nationally. Given how big the Department of Conservation estate is on the Coast, we are expecting significant benefits here.

Ideally, this package will allow businesses considering redundancies and downscaling to redeploy their staff on environmentally focused activities. Given the news of some of the recent big closures in the Glacier Country, there is a great opportunity for the Coast to get behind this major initiative.

It will support retraining and retaining workers in the region by engaging them in meaningful work before they can move back into the tourism sector as demand returns.

Infrastructure and transport investments.

The Government has also allocated significant funds to an infrastructure investment package ($3.2 billion) and a railway package ($1.2 billion). Our region’s Mayors and our Economic Recovery Steering Group have already put forward a number of shovel ready projects to the Government for the West Coast, so we are expecting some significant job creating projects to come from this.

Further business support.

The Budget has also outlined various other packages that should benefit Coast businesses, including increased support for R&D and e-commerce support. We are still awaiting specific details on these packages and how West Coast businesses will be able to access them.

Overall, the Budget will go some way towards helping the West Coast recover, but it certainly will not solve all of the economic and social issues we are facing. There is still $20 billion in unallocated funds and as one of the hardest hit regions we should rightly expect more governmental support.

DWC is about to send out another Coast-wide survey to our business community to help better gauge the impact of COVID-19. We would greatly appreciate your participation in this, so we can provide an evidence-based overview to inform Government and provide support.

Media Release: 15 May 2020