Calls grow for wage subsidy refunds after Reserve Bank news

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Business deposits have boomed and borrowing has dropped, according to latest Reserve Bank figures, driving calls for more wage subsidies to be repaid.

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 So far $533m of wage subsidies have been repaid – the Ministry for Social Development has carried out more than 10,600 audits, referring 973 cases for investigation.
Photo: 123RF

Figures released to Checkpoint showed business bank deposits in October were up more than $17 billion on the same time last year – $104bn, compared to $87bn in 2019.

That was in contrast to business borrowing from banks which was $109bn, about $6bn less than the same time last year.

The boom comes after more than $14bn in Covid-19 wage subsidies were paid this year.

Auckland University accounting professor Jilnaught Wong said the figures showed there were many outfits doing very well.

“In spite of the various lockdowns we’ve had, business this year has been better than business last year,” Wong said.

“Businesses are operating more efficiently, better management of inventories and receivables and hence that’s why the deposits have gone up.”

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More businesses needed to reconsider repaying their wage subsidies given the strong economic outlook, he said.

Inequality researcher Max Rashbrooke was adding to those calls – he said the Reserve Bank figures highlighted a real problem around fairness as the pandemic’s economic hit had not been felt evenly.

“I think it has been a good year to be a wealthy person – we don’t have detailed figures on that yet but given that New Zealand businesses as a whole have done relatively well, certainly better than expected, a lot of people’s investments will have held up.”

Those who could least afford it had suffered the most, he said.

“Inevitably this year has been the worst for the people who were already struggling – there’s a lot of people who were already on low wages who have lost their jobs.

“The latest advice to the government in briefings to incoming ministers on child poverty is that the pandemic will be on the children who were already doing it toughest.”

He wanted businesses which made more profit in 2020 than they did in 2019 to pay back their wage subsidies to try to put things right.

“Those businesses received significant support from us as taxpayers – the first people in line to be paid back by the businesses that have done well should be us as taxpayers.

“I think to put the interest of a relatively small number of shareholders ahead of the interest of the whole country when it comes to paying back the wage subsidy is completely unacceptable.”

Today, the government received a large wage subsidy refund with retirement village groups Summerset and Ryman announcing more than $22 million between them would be repaid.

Both businesses had paid a dividend to shareholders.

Summerset chair Rob Campbell said backlash against the company’s dividend payment had influenced their decision.

“Obviously it factored in, but a fair bit of discussion about this stuff has come from people whose mouths are bigger than their brains, frankly.

“If they really understood how public companies worked and the various stakeholder interests that have to be balanced by a board taking into account a range of factors making a decision they would understand it much better.”

Summerset had acted in a way the government would have expected – by using the subsidy in a period of time of uncertainty, and repaying it when they felt more confident, he said.

So far $533m of wage subsidies have been repaid – the Ministry for Social Development has carried out more than 10,600 audits, referring 973 cases for investigation.

Finance Minister Grant Robertson yesterday announced the wage subsidy scheme would be available again if there was a regional or national move back to alert levels 3 or 4.

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