Government provides $6.25 billon in new package
Staff Reporter (Indian Newslink), March 24, 2020
The Government, Reserve Bank of New Zealand (RBNZ) and retail banks have announced a major financial support package for homeowners and businesses affected by the economic impacts of COVID-19.
The package will include a six month principal and interest payment holiday for mortgage holders and SME customers whose incomes have been affected by the economic disruption from the global health crisis perpetrated by coronavirus.
Protecting jobs, economy
The Government and the banks will implement a $6.25 billion Business Finance Guarantee Scheme for small and medium-sized businesses, to protect jobs and support the economy through this unprecedented time.
Finance Minister Grant Robertson said that the government, RBNZ and retail banks are acting quickly to get these schemes in place to cushion the impact on New Zealanders and businesses from this global pandemic.
“These actions show how we are all uniting against COVID-19. We will get through this if we all continue to work together. A six-month mortgage holiday for people whose incomes have been affected by COVID-19 will mean people won’t lose their homes as a result of the economic disruption caused by this virus,” he said.
Mr Robertson said that specific details of this initiative are being finalised and agreed urgently and banks will make these public in the coming days.
Short-term credit for businesses
The Reserve Bank has agreed to help banks put this in place with appropriate capital rules. In addition, it has decided to reduce banks ‘core funding ratios’ from 75% to 50%, further helping banks to make credit available.
RBNZ Governor Adrian Orr said that the measures would give people and businesses the certainty to cushion the blow of COVID-19.
The Business Finance Guarantee Scheme will provide short-term credit to cushion the financial distress on solvent small and medium-sized firms affected by the COVID-19 crisis, he said.
Mr Robertson said that the scheme leverages the Crown’s financial strength, allowing banks to lend to ease the financial stress on solvent firms affected by the COVID-19 pandemic.
“The scheme will include a limit of $500,000 per loan and will apply to firms with a turnover of between $250,000 and $80 million per annum. The loans will be for a maximum of three years and expected to be provided by the banks at competitive, transparent rates. The Government will carry 80% of the credit risk, with the other 20% to be carried by the banks,” he said.
Banks well capitalised
Mr Orr said that banks remain well capitalised and liquid.
“They also remain highly connected to New Zealand’s business sector and almost every household in New Zealand. Their ability to extend credit to firms to bridge the difficult times created by COVID-19 is critical and made more possible with today’s announcements. We will monitor banks’ behaviour over coming months to assess the effectiveness of the risk-sharing scheme,” he said.
Mr Robertson said that government, RBNZ and the Treasury continue to work on further tailor-made support for larger, more complex businesses.
Need for rigid regulations
Prime Minister Jacinda Ardern told the Nation through a media conference yesterday (March 23, 2020) that without tight restrictions, New Zealand is at a very high risk of Covid-19 spreading with an even worse risk of hundreds of thousands of people dying.
“That worse case scenario was simply intolerable and would represent the greatest loss of New Zealanders in our history. As a government, we will do everything in our power to protect you. Now, I am asking you to do everything you can to protect all of us. I would rather make this decision now, and save those lives, and be in lockdown for a shorter period, than delay, and see New Zealanders lose loved ones and their contact with each other for an even longer period. I hope you are all with me on that,” she said.
