Coronavirus: Finance Minister not ruling out Covid-19 response dropping cash to Kiwis

Thursday, 23 April 2020

Tony Alexander said the Government should focus on giving money where it had the most impact.

Finance Minister Grant Robertson isn't ruling out giving money to New Zealanders to help boost the economy.

He told Newstalk ZB there would be more money coming as the Government worked to help the country deal with the impact of Covid-19.

The responses seen so far were just the first steps, he said.

'We're prepared to be pragmatic and will shift and change and continue to do that right through from now until the Budget.'

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He said while there would be no tax cuts this Budget, the Government was still open to the idea of giving cash to New Zealanders.

Finance Minister Grant Robertson said while there would be no tax cuts this Budget, the Government was still open to the idea of giving cash to New Zealanders.

'Things like helicopter money as it's sometimes called is part of a potential package but that has downsides as well… it's not particularly targeted.

'I think we've got to look at all the options for stimulating the economy.'

He said he was also looking at things such ash the example of the first Labour Government's building programmes.

'Helicopter money' is an idea that is gaining traction internationally. 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.

Jarrod Kerr, chief economist at Kiwibank, earlier called for payments of $1500 per New Zealand adult.

Australia has given a one-off payment of $750 to people already receiving forms of Government support and used more widespread payments as part of its response to the Global Financial Crisis.

Economist Shamubeel Eaqub said he would rather see the Government guarantee a minimum level of income.

'Universal payments are easy, but too broad to be effective. Better it goes to people in large amounts, where it will do the most good.'

Another economist, Tony Alexander, agreed.

'Most people will not need the money because they will still have jobs or never needed one or were on a benefit. A lot of the money therefore would be wasted in terms of trying to immediately stimulate the economy. Second, a lot of it would not be of much benefit because the spending would go on imported goods.

'The money would boost factories and employment in China rather than here. Third, times are very uncertain and in this climate it is natural to think that people will want to build their precautionary savings. A lot of it would simply be saved until things look better.'

But he said the Government would have to bring in other stimulatory policies to get things moving again.

'They will throw everything they have at the economy to produce rising confidence and hopes for the future going into the election. That is also why they won't pursue policies which cause house prices to fall simply to improve affordability. More people are unhappy about house prices falling than are happy.

'The spending from Government would be better undertaken by themselves on measures which boost employment. In other words, there would be better bang for their buck extending the wage subsidy scheme than throwing money around and hoping it does something good.'

Kerr said the payments could be targeted with cash for low-income households and vouchers for domestic tourism or local retailer for those earning more.

A one-off payment of $1500 to all taxpayers would cost $5.8 billion, he said.

It would be faster and more effective than tax cuts, he said. 'Tax cuts are matchsticks, but a cash handout is a blow torch. If we want quick and easy stimulus – cash handouts are our best bet. Besides, our tax brackets first need a serious re-think.'