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Time for rethink on wage subsidy?

Opinion Piece

by Belinda Mackay, Gisborne Chamber of Commerce president

Belinda Mackay

This weekend, while contemplating the move to Level 3, I happened upon a podcast by Spinoff contributor, Bernard Hickey. In the face of businesses throughout Aotearoa being given half a billion dollars within two days of the wage subsidy version 2021 being available, Hickey made some very salient points. It got us thinking; should businesses, and this includes Tairawhiti businesses, while they qualify for the subsidy during lockdown, take it?

When we went into lockdown last year the landscape looked very different. We didn’t know what our economy would look like when we came out of lockdown and things looked very scary. This time around, while there is concern, there is not the same uncertainty.

Last year, the wage subsidy worked well. Some may argue it worked too well and is moving our country into a period of inflation. What can’t be disputed is that at the time it saved jobs and stimulated economic activity.

We know that some businesses (including local businesses) did very well after lockdown, particularly construction. Of the top five businesses that received the largest subsidy pay-out (Air New Zealand, Fletcher Building, The Warehouse Group, Downer & Fulton Hogan), one could argue that this time around only Air NZ would truly have a case for claiming an additional wage subsidy. The remainder of those businesses all reported strong profit at the end of their financial year, some paid shareholder dividends. Did those businesses pay back the subsidy in the face of strong profit? Well, The Warehouse paid back the money after they took the subsidy, made staff redundant and then reported a full year profit of $44.5m, and Fulton Hogan paid back $1m. I’m sure that this happened locally too.

Many businesses that took the subsidy, in hindsight, didn’t need it, generated profit, made people redundant, paid out dividends and did not pay the money back. All parties would argue that “at the time they thought they needed it and they received it within the parameters of the scheme”.

Another point Hickey makes in his podcast, which I agree with, is that while government agencies are not concerned with getting money back from business, they have been litigating to ensure beneficiaries pay back the money they owe. This says, “it’s OK for business to keep, say, the $33m that Fulton Hogan got but if you’re a beneficiary, watch out”.

Hickey suggests the Government should have taken the $14 billion that businesses received and distributed that instead amongst our team of 5 million, so each of us received $2800 each. Imagine the impact for the people of Tairawhiti.

For some of us, that would mean spending money with local businesses affected by lockdown. For others, it would mean the ability to help feed, heat and clothe their family which would also benefit local business. Any which way you look at it, that payment would generate economic activity and would help lower-income families, who have not been positively affected by the post-2020 Covid lockdown boom.

The horse has bolted on this idea this time but until we’re a well-vaccinated country, lockdown will continue to be a tool used to deal with Delta.

So, for any future lockdowns, perhaps, before business approaches the Government for yet another wage subsidy, us business owners should ask, “just because our business can qualify, does that mean we should?” And because lockdowns may well continue to occur until we are a well-vaccinated country, the Government should look at the scheme and ask themselves if there is a better way.

  1. Zahra, Tasman, NZ says:

    Interesting points for sure. I think it depends on how long the lockdowns continue. I do think the reason businesses did OK after the lockdowns is because they had support to get through them. There is no economic recovery or boom after lockdown without this support if it means the businesses collapse.
    If companies such as those you mention then go on to post massive profits, then yes, they could be asked to reimburse the people for those monies received. That is only fair. But where do we put the line on that?

    I also think it is a pipe dream that any amount of vaccination will stop lockdowns as long as the chosen policy remains one of elimination rather than living with it. We will never be able to eliminate this ongoing, unless we lock down every time a case gets into the country – which will happen.

    The other issue being the existence of breakthrough cases, which aren’t really “breakthrough”, they are vaccine failure to stop infection, spread and illness. Basically.
    And lastly, the nail in the coffin for your statement is that the mRNA vaccines are programmed for one variant. So the Delta variant is not covered as well by the current Pfizer vaccine, which is programmed for alpha aka the original virus.
    Sorry for the bad news. Don’t hate the messenger.
    Cheers and thanks for you article.

  2. Maree Conaglen says:

    Well this is the best thing I’ve read from a business person. It totally makes sense. The article about the universal basic income relates well to this too. If people that are the most vulnerable in society are given some security with a basic income,
    then it’s a win-win for businesses as well as providing better social outcomes for all members of our society.

  3. Lloyd Gretton, Auckland says:

    Auckland is an international city. I am now stuck in my apartment building and haven’t left it since lockdown. That can’t be good for my and my family’s health. The traditional system of quarantine, 40 days blockade of infected area, worked well. After the end of this lockdown in Auckland, another variant will inevitably happen in the next months. The city can’t survive with this ongoing farce. The locals at Hicks Bay had the right idea in quarantining their area. When people come in, so do viruses. People are viruses.