Increased support payments for newly jobless people

The newly jobless due to the Covid-19 crisis will be able to get $490 a week tax-free for 12 weeks.

The Government this morning announced the $570 million scheme for temporary income support payments to New Zealanders out of work because of the pandemic.

Full-time workers will be eligible for $490 a week and part-time workers will get $250, which is also available for students. Both payments are paid tax-free.

Finance Minister Grant Robertson said the payment should help the newly jobless adjust and find new employment or retrain.

The amount was worked out based on roughly how much the wage subsidy scheme was after tax.

Getting the payment came with expectations and responsibilities, he said.

People who receive the Covid payment will be required to:

• Be available for, and actively seeking, suitable work opportunities while they receive the payment
• Take appropriate steps towards gaining new employment; and
• Identify and take opportunities for employment, re-deployment and training.

People with partners who are still working may be eligible for this payment, as long as their partner is earning under $2000 per week.

Students who have lost part-time work as a result of COVID-19 may also be eligible for the part-time rate.

The 12-week scheme is forecast to cost about $570 million which incorporates $1.2 billion of payments offset by $635 million of saved benefit payments, with small administrative costs. It will be funded from the Covid Response and Recovery Fund.

Robertson said the scheme was "very similar" to the Job Loss Cover payment introduced under the last Government during the Canterbury earthquakes and had a number of similarities to the ReStart package for workers who lost their jobs in the Global Financial Crisis.

"We know these schemes reduced the impact on people who lost their jobs due to those shocks. They show how important it is for people to have a safety net to support themselves and their families as they look for new work or retrain."

Robertson said the fact the payment was higher than the benefit wasn't an acknowledgement that the benefit was too low.

It was a "pretty challenging calculation to make" to estimate how many people would use the scheme, he said.

The payment was different to the benefit because it reflected a "sharp drop in income", Robertson said.

He said work was underway on the possibility of a more permanent unemployment insurance scheme in New Zealand and work had been commissioned by the Future of Work Ministers group following a request from Business New Zealand and the Council of Trade Unions.

Social Development Minister Carmel Sepuloni said the temporary income support payment would give people newly out of work "breathing space" when in normal times they might have been able to get a new job more easily.

She warned unemployment would get worse before it got better.

The scheme will start from June 8.

Sepuloni said the decision to make it tax-free was because they needed to roll the scheme out as quickly as possible and this was the least complicated way for MSD to pay it out.

"New Zealand is in a better position than many because we went hard and early to put support in place through the wage subsidy. Internationally countries are facing increased unemployment due to Covid-19 and NZ is not immune."