Johnston Associates Chartered Accountants

Masterminding Brighter Tomorrows

covid-19

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2020 Budget – Rebuilding Together

Let’s start with funding the 50 Billion from where?

To fund the Budget, the Government has forecast bond issuance to $60 billion for the June 2021 year. Crown debt is expected to rise from 19.3% of GDP, up to a peak of 53.6% by 2023. This will surpass the level of 40% seen in 2013 after the GFC and the Canterbury earthquakes. The current Government Debt ratio is 19%, therefore we may have options other Governments don’t who’s current positions are significantly different to ours US (107%), China (50%) and even Australia (45%). Even if we balloon to over 50% by 2023, I think the trouble will be the wont hold that figure, its aspirational.

Budget Outline

The key element is the establishment of the $50 billion COVID-19 Response and Recovery Fund (CRRF), with $20+ billion of it still to be spent over the next 4 years, with $29.8 billion of it committed through Budget 2020 – ten times that which the Government was planning to spend pre-COVID-19.

Treasury indicated that its forecasts and assumptions on Government expenditure and revenue given the current environment are highly uncertain.

The Budget assumes New Zealand’s borders remain closed to international visitors until the end of March 2021 – three months sooner than forecast in the earlier Treasury’s economic scenarios. The scenario relies on a vaccine being developed and distributed by this time.

[Read more…] about 2020 Budget – Rebuilding Together

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Are you a small business looking for a cash injection?

Last week the Government announced a new 12-month interest free loan product. Loans ranging from $10,000 to $100,000 are available for small businesses with less than 50 EMTs.

The key criteria to providing these loans is proving business viability before a company can borrow funds.

The Government has also made changes to the criteria for the Business Finance Guarantee Scheme, including removing the requirement for a General Security Agreement.

The basic notes for the new lending process will be released in due course. Here are the key points to take away from this;

  • The design of application forms and processes are still being completed, no doubt some forms should be available late this week
  • Applications can be made from the 12th of May 2020
  • IRD will administer and process applications for the loans.
  • $10,000 will be the base loan amount
  • Then you may borrow an additional $1,800, per full time employee (therefore you need 50 FTE employees to get the full $100,000)
  • It says the loans are available to businesses with 50 or fewer FTE staff, we assume you can have more than 50 staff, if some of them are part time as long as the equivalent FTEs are not more than 50
  • No repayments are required for the first two years
  • The first year of the loan is interest free
  • After the first year, the interest rate is 3% pa for a maximum of five years
  • You need to have had a 30% revenue reduction/hit
  • Can use it to cover Rent, Insurance, Utilities, Supplier Payments and Rates

If you want to consider taking this loan, check in with us before you start the application process. We can help run through the risks and rewards best suited to your business