The Finance Minister has announced that the Government's original Budget 2020 priorities have been "put on ice" to prioritise the "1-in-100 year shock" to the economy caused by COVID-19.
In a pre-Budget speech on Thursday, he said most years the Budget represents the end of a process that began six months before, the "sum total of the Government's economic action plan" for the year ahead.
But Grant Robertson said Budget 2020 will be "just one staging post in our fight against, and recovery from, COVID-19", and he has not shied away from the seriousness of it.
Robertson highlighted how the global economy is taking a "serious hit", with the IMF forecasting that global growth will reduce by 3 percent in 2020 - worse than the global financial crisis.
"You will see in the Treasury's Budget forecasts next week that the path forward to recovery will be challenging," he said, adding that "we are no longer talking about growth in the near term".
"Business investment and confidence will take a hit. Unemployment will rise."
He said it's expected that advanced economies will contract by more than 6 percent and that the World Trade Organisation predicts that trade volumes could reduce by up to 32 percent.
Robertson said New Zealand's economic response to COVID-19 "has to happen every day, not just Budget Day", to support Kiwis to "get through and to rebuild stronger and better".
Robertson said he will not "sugar-coat" the scale of the investments needed to help the country.
"We will be running operating deficits for an extended period and allowing net core Crown debt to increase to levels well beyond our previous targets," he said.
"This is a necessary and responsible move as we fight the virus, reduce the impact on businesses and workers, and rebuild our country."
Robertson indicated confidence in New Zealand's current position.
He pointed to the UK which came into the COVID-19 crisis with net debt above 75 percent, the United States 90 percent, and some countries are already well over 100 percent, while New Zealand started below 20 percent.
Robertson said he will "remain committed to managing our books carefully and responsibly" and that Budget 2020, to be unveiled next week, will reflect that.
But the economic situation has forced the Government to abandon the priorities for Budget 2020 that were outlined at the end of 2019.
Those priorities were transitioning New Zealand to a climate-resilient economy, enabling Kiwis to benefit from technology, support physical and mental wellbeing, as well as children, Māori and Pacific people.
"The new spending packages planned on our five priorities that were announced in the Budget Policy Statement have been re-assessed. Unless they are meeting a core cost pressure, we have put them on ice," Robertson said.
"We may revisit them in future, but the focus for Budget 2020 has now very quickly become providing the strong public services we need and taking our next steps to recover and rebuild."
Robertson said Budget 2020 will expand on the $12 billion New Zealand Upgrade Programme announced in January which focused on infrastructure, but it will still "balance the needs of our economy, our people, our environment and our communities".
The Government has already committed $20 billion to support the economy through the crisis, and that includes the wage subsidy scheme which has so far cost $10.6 billion and subsidised 1.7 million New Zealanders' wages.
Robertson said he has seen criticism of the scheme, such as companies claiming it when they didn't need it. But he still stands by the policy, because "unlike many countries, we got money into the pockets of Kiwis right away".
Opposition finance spokesperson Paul Goldsmith said next week's Budget will likely be the biggest spending that New Zealand has seen, and urged the Government to be careful.
"Now, more than ever, we need full scrutiny of spending decisions. Instead, the Government is undermining the basic mechanisms to hold it to account."
He criticised the Government for doing away with Regulatory Impact Statements, which provide Treasury analysis of the Government's decisions and aims to ensure taxpayer's money is being spent wisely.
"New Zealanders will be paying off the debt incurred from the economic fallout of COVID for years to come. Proper scrutiny of taxpayer dollars is more important than ever."
