A one-time payment of $1,500 per adult and $500 per child would provide a much-needed boost to the economy once Level 3 restrictions are lifted, says Kiwibank chief economist Jarrod Kerr.
Kerr says that at certain point the government must shift from saving the economy to stimulating it and that there’s no better way to do this than by putting money in people’s hands.
“It’s actually not an overly expensive exercise and it can work as a one-off temporary boost,” he said.
According to Kiwibank analysis, these handouts would cost about $6 billion.
Although Kerr says payments should only be delivered once Level 3 restrictions are lifted, he adds that they should be announced now, as this will fuel confidence and give people a reward for putting up with restrictions.
“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,” he said.
Kerr concedes that there is no guarantee that people will actually spend the money, as some will opt to use it to pay off outstanding debt from things like mortgages and credit cards, or even put it into savings. However, for the cash injection to have the desired economic effect, he says only about 60% of the total would have to go towards actual purchases.