24 Apr 2020

Call for New Zealanders to get one-off cash payment to spark economy

10:27 am on 24 April 2020

Kiwibank economists are calling for a cash injection once we leave level 3 restrictions - putting money straight into New Zealanders' wallets - to help ignite economic activity.

New Zealand currency held fanned out in someones hand

Photo: 123rf.com

They say it would cost $6 billion, or $2b if the support only went to low-income households.

Chief Kiwibank economist Jarrod Kerr told Morning Report that a cash injection of $1500 per adult and $500 per child would help to get the economy moving again.

"It's a reward, it's an incentive, once we're out of lockdown let's get back, let's support local businesses, let's support hospitality and tourism and the like and retail and get out there with a shot of adrenaline in the economy and try and kick-start some momentum."

Kerr said you cannot make people spend that money and there are some households which are struggling which would need to use that money to cover household bills or credit card debt.

But he said that is okay since for such a subsidy to be really successful, only about 60 percent of it would need to be spent.

"Studies overseas show that the way you deliver it is important, if people spend 60 percent of it then the kick-on effect for the economy is quite strong and for every dollar that the government spends then you get anywhere between $3 and $5 of activity and of course that activity, the businesses that receive the money, they're paying tax, they're paying GST.

"It's actually not an overly expensive exercise and it can work as a one-off temporary boost," Kerr said.

He said the payment would only work once lockdown was over and the country was in level 1 or 2, but it was important to announce it now because then people will see it as a reward for getting out of level 3.

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