New Zealand families 'need cash payouts' to force economy back to life

Tuesday, 21 April 2020

Fiscal policies are needed to stimulate the economy, says Kiwibank chief economist Jarrod Kerr.

New Zealanders should each be given a payment of $1500 to stimulate the economy, Kiwibank chief economist Jarrod Kerr says.

'Everything we have talked about to date is about keeping businesses up and running,' Kerr said. 'Assisting individuals who have been directly impacted… that's what we should have been doing. But there comes a time when we move to level two and then to level one and at that point we need to move from saving the economy to stimulating it.'

He said New Zealand would re-enter a new world after the lockdown. One way to put a 'Firestarter' under the economy was to direct more money back into New Zealanders' hands.

That could be done with tax breaks – getting rid of GST for a period or reducing its rate – or by giving cash to people.

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Kerr said he was living in Australia in 2009 when the government sent A$900 bonus cheques to Australians to help save the economy after the global financial crisis.

He said the spending it created helped to avert a recession. 'It might not sound a lot but the psychological impact of not having that technical recession was huge. It's a benefit on the behaviour side, for the psychology of the Australian economy which would have been in recession otherwise.'

While New Zealand was definitely now in a recession, he said, there would be a big benefit for sentiment if people could see a jump in activity in third quarter of this year, rather than a flattening or minimal increase.

'It fuels confidence. It's an easy thing to do and I think we need to think about all the options.'

United States President Donald Trump has given every adult US$1200 (NZ$2000) and every child US$500 - although this amount decreases for earners of more than US$75,000 a year.

'I'd say a good $1500 per adult and $500 per child would cover a few months of bills for struggling households,' Kerr said.

That would mean a household of two adults and two children would receive $4000 and a single parent with three kids would get $3000.

'Some families will cover costs. Some will go shopping. Some will save it. It all helps.'

He said New Zealand was in the sort of crisis that no one had seen before. 'Normally a crisis takes a lot longer to develop. We are seeing businesses shut down immediately. This is incredibly fast. We need to be incredibly quick to provide relief.'

He said the Government was open to all options and his team was in regular contact with the Treasury.

'We need to have this discussion now, the more we can throw at it the more we will bounce back.'

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