Government has pledged $76 million for phase two of its Covid-19 Economic Response Plan, announced the Deputy Prime Minister Mark Brown last night.
The phase two of the stimulus is split across three themes:
● Lifeline Support
● Transforming the economy
Brown said from July 1, the immediate priority is to protect the livelihoods of people and businesses.
Lifeline support includes an extension of the wage subsidy for eligible businesses until September at an increased rate of $320 per week for full-time staff.
A ‘hibernation’ period of interest repayments for one year for individual and business debt holders will remove the interest burden with the deferred interest to be repaid under more favourable economic circumstances. Businesses will also have access to low interest short-term loans, he announced.
There will be an increase of the tax-free threshold for individuals from $11,000 per year to $12,800 on July 1 and to $14,600 from January 1 2021.
The unemployment benefit measure will be extended with re-training initiatives and an Emergency Hardship Fund started to help families get back on their feet.
Reductions in superannuation contributions for both employees and employers will continue for another three months with a further drop to one percent.
Coordination with Te Aponga Uira is taking place with the hope of more electricity discounts to eligible households and businesses.
The Deputy Prime Minister said the recovery theme covers kick-starting economic growth over the medium term.
Fees Free is an initiative to encourage the workforce to upskill, including a waiver of fees during Semester Two at the Cook Islands Tertiary Training Institute and a select number of certificates offered by the University of the South Pacific between June and December 2020, Brown said.
For businesses, he said tax measures such as accelerated depreciation are expected to promote investment in new productive equipment, buildings and other capital works with low interest longer-term loans and government-guaranteed loans to reduce finance costs for investment.
The Private Sector Taskforce made up of businesses is positive about the next phase of the stimulus package.
Its chairman Fletcher Melvin said they are happy that government recognised the importance of increasing the wages subsidy in order to further reduce wage expense of top ups.
Melvin also welcomed moves to alleviate pressure of interest for a longer period, reduction of superannuation contributions, and plans to make training possible without businesses incurring further cost.
He said they were looking forward to assisting with the finer details of the roll out of phase two.
The taskforce wants to be actively engaged with opening the borders as safely and quickly as possible in order to get the economy back on track and businesses standing on their own two feet, Melvin added.
“There is a need to support businesses in the short term period before July in the form of grants so that they are able to survive until the opening of the border which could be as early as July,” he said.
“Without some form of grant then there are businesses that will be forced to go into hibernation to stop the cash burn and this could mean redundancies.
“These are some of the issues that still need to be worked through and we are encouraged by the Deputy Prime Minister’s willingness to meet and work with the Private Sector to solve some of these major issues.”
Mark Brown acknowledged the country’s reliance on tourism, yet there is no quick fix to diversifying the economy, he said.
“With no firm date for the reopening of borders, we must continue to keep the economy running while providing support to households. Phase two will provide economic continuity as we head towards that goal.”
Brown said phase two is also an opportunity to start diversification by providing support for the private sector.
He revealed government’s SMART Economy initiative which recognises the soon-to-be online Manatua Cable and reform of the telecommunications sector as catalysts for a commercial ICT transformation.
This initiative will provide a mix of grants, lower interest loans and tax credits to support commercial business ventures providing innovative ICT applications and services to business and consumers, Brown announced.
Smart AgriTech which is another government initiative aims to foster innovation and productivity in the commercial agricultural sector by providing grant funding and equipment to encourage investment and improve commercial viability and economic sustainability.
Government will be appropriating funds for phase two initiatives in the 2020/21 Budget that will be put before Parliament next month.