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$3 billion tax break to help small businesses

Finance Minister Grant Robertson said the worst-case scenario level of unemployment was not something the government was willing to see happen. Photo: RNZ / Dom Thomas

Small businesses in New Zealand will get a $3 billion boost through tax breaks to help them ride out the worst of the impending economic crisis.

The latest rescue package comes as the country prepares for a possible lift of level 4 restrictions next week.

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Cashflow is one immediate problem, which the government is wanting to help fix through the tax system.

Businesses forecasting losses will be able to claim cash payments against tax previously paid on profits.

The IRD will also have discretion to be more flexible with deadlines, and the law will be changed to take some pressure off commercial rents.

On the broader economy, scenarios that can only be described as alarming have been released by Treasury experts, but no-one can accurately say how bad the damage is really going to be.

All predict a sharp drop in growth this quarter, but the economic recovery is dependent on the level and duration of restrictions, balanced against the size of government rescue spending.

In the worst case economic scenario unemployment soars past 20 per cent - that's based on New Zealand being on level 4 for six months and level 3 for another six, with no further government support.

Finance Minister Grant Robertson says that is not something the government is willing to see happen, indicating it could borrow more to shore up the economy.

"Certainly that level of unemployment would not be acceptable to me ... or the prime minister; I simply don't see that scenario playing out."

While many New Zealanders are getting cabin fever, for many business owners each extra day under lockdown is a day closer to shutting up shop altogether.

Tomorrow they will get a better idea of what kind of activities might be allowed under level 3 but businesses are already desperate to get back to work.

Grant says the government's approach will be based on the principle of 'what constitutes safe economic activity?' under level 3.

Max Whitehead of advocacy group Small Business Voice says that presented opportunities for maybe a small cafe to start delivery or takeaway service, or a sole digger driver getting on with their work.

"Allow those people who, who are usually business people with common sense, to apply it, and it'll be in their own interest to keep things safe."

The IRD will have discretion to be more flexible with deadlines. Photo: RNZ / Richard Tindiller

Cabinet ministers will decide on Monday whether to move into level 3, potentially giving the country two days' notice.

Kirk Hope from Business New Zealand says that's workable, as long as there is certainty around the rules before then.

Any business would take the opportunity, says Kirk..

"Right now a lot of small businesses are just sitting there staring into the headlights, they just do not know what to do.

"So I think this will give hope ... if a small business were able to get back on those limited conditions, it's certainly going to put a lot of positive thinking into our society and that's what's going to help us recover a lot quicker."

Council of Trade Unions president Richard Wagstaff recognises the need to reignite business, and therefore jobs, but said personal safety could not be sacrificed.

"To ensure that people are safe from COVID, safe from either catching it and, or passing it on to other people ... unless we do that there will be a real risk."

If that wasn't the case, Richard says, people will be reluctant to return to the workplace

-RNZ/Jane Patterson

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