The government has recently announced some critical financial support packages for the sustenance of businesses through virus-driven repercussions.
- Existing COVID-19 support schemes of the government have also started to deliver promising results for households and businesses.
- Besides government support, it is equally important for businesses to execute the right money management strategies to sail through potential financial difficulties.
Undoubtedly, the COVID-19 pandemic formed a ‘giant hole’ in the cash-flow of businesses amid the detrimental impact of closed borders and nationwide lockdowns. However, unprecedented support from the government aided the continuity of businesses and their smooth navigation through challenging times.
Amid rising fears of coronavirus transmission, NZ Prime Minister Jacinda Ardern called a week-long lockdown in Auckland towards the end of February that left several businesses distressed. The latest lockdown triggered some crucial financial support packages for businesses to alleviate their financial stress in the lockdown.
While Auckland has successfully emerged from its week-long shutdown, the continuation of government support seems essential to keep businesses up and running in the near future. With that said, let us discuss three emerging trends under the government’s coronavirus support programme that are currently driving the recovery of businesses from the virus-induced crisis:
Extension of Wage Subsidy Scheme
With the financial health of many businesses slipping away amid fresh lockdowns, the government recently announced the extension of the coronavirus wage subsidy scheme. The extension of the scheme allowed businesses to make applications to the Ministry of Social Development from 4 March 2021, with payments targeted to begin from 8 March 2021.
The ‘COVID-19 Wage Subsidy March 2021’ helps self-employed people and employers to continue paying their employees. The subsidy also shields jobs for businesses impacted by the recent increase in Alert Levels on 28 February 2021. Interestingly, businesses had repaid over NZ$700 million of the wage subsidy before the nation went into lockdown 3.0 in mid-February.
The return of wage subsidy is anticipated to boost businesses that have lost substantial revenue amid nationwide restrictions and lockdowns. Besides, it will safeguard the ability of businesses to pay their staff over this tough time, enabling them to focus on improving productivity and fostering profits.
New Resurgence Support Payment
Deputy Prime Minister Grant Robertson recently set up a new Resurgence Support Payment for the businesses impacted by the resurgence of coronavirus. The government has made a change to the payment criteria under the previous Resurgence Support Payment scheme, lowering the time over which a revenue fall is evaluated from 14 to 7 days.
With this modification, firms can apply for this financial support from Inland Revenue for 14 to 21 February period from 8 to 22 March 2021. To qualify for the payment, a business must exhibit a 30 per cent fall in revenue over a 7-day period at higher alert levels relative to a standard similar revenue period in the six weeks before the rise in Alert Level.
The new Resurgence Support Payment recognizes the impacts of cash-flow or one-off costs faced by businesses when the government raises an Alert Level to control the spread of the virus. The move will help businesses limit some of the liabilities and costs associated with unexpected shutdowns.
Consumer Travel Reimbursement Scheme
The government’s consumer travel reimbursement scheme unveiled in October 2020 has helped return more than NZ$352 million of credits and refunds to Kiwis who had international travel cancelled in the wake of coronavirus. As per the Ministry of Business, Innovation and Employment (MBEI), around NZ$690 million was locked up due to COVID-related cancellations.
The travel scheme was set up to provide financial support to the travel sector, stimulating the recovery of funds held internationally while also helping customers get back their money. In line with expectations, the scheme is returning money back into the local economies as people now look to holiday domestically, giving a boost to the nation’s tourism industry.
While almost half the money lost in travel bookings amid COVID-19 has already been retrieved, travel agents are calling for an extension of the consumer travel reimbursement scheme. This is because ‘’hundreds of millions’’ of dollars’ worth of travel bookings are still to be retrieved from some travel agents.
The government’s financial support packages have been instrumental in helping businesses deal with liquidity constraints & supply chain disruptions emerging from the coronavirus pandemic.
However, it is hard to neglect that these packages are not so rewarding in terms of covering immediate losses from unwanted shutdowns. Thus, it seems equally important for businesses to employ the right money management strategies to endure and sustain short-term losses evolving from COVID-disruptions.