This weekend will see the Government leave the Level Four lockdown where the emphasis has primarily been on health matters and move to a new phase where the economy will take centre stage.
The lockdown has been an obvious success with new Covid-19 cases yesterday tapering off to three and a Stuff-Colmar Brunton poll reporting that 88 per cent of those polled trusted the Government to make the right decision on Covid 19
But a more ominous 42 per cent said Covid-19 had impacted on their personal income.
There was further evidence yesterday of the dramatic slowdown in spending that the lockdown has provoked.
The Reserve Bank reported that total monthly credit card billings in March fell 9.1 per cent to $3.7 billion.
The Bank said (in a statement): “This is the largest monthly fall on record and reflects the impact of COVID-19 across the country.”
While the immediate focus of Finance Minister Grant Robertson next week is expected to be business support, there is growing support for the Government to make a cash payment to households. However the Prime Minister was sounding a note of caution about the idea while a National backbencher supported it.
Kiwibank’s Chief Economist, Jarrod Kerr endorsed the idea yesterday, and a National backbencher has circulated a paper to his colleagues supporting the concept as well.
(POLITIK cannot name the backbencher because he is not authorised to make public statements on the economy.)
The MPs paper considers tax cuts (a key part of National’s economic policy) and argues against them.
“The remaining issue is whether wider tax cuts are the best way to deliver a stimulus to the economy,” it says.
“My personal view is that circumstances have changed.
“Tax cuts only favour those still working and are only realised progressively through PAYE reductions during the course of a year.
“And once in place, they cannot easily be changed.
“Many countries around the world have simply given, say, a $1000 cash check to individuals.
“This approach means the benefit is immediate and delivered at the point of most need.
“It can also be tailored to go only to those on low-income levels.”
National’s Finance spokesperson, Paul Goldsmith, sort of agreed with the paper.
“Stimulus will be important, but only once we’re out of this and businesses are allowed to start operating at full capacity,” he said.
“.Until then, universal cash handouts will simply result in more Government debt for very little economic gain.
“Down the line, putting more money in people’s pockets through some form of tax credit or tax rebate is certainly worth considering.
“As is tax relief to encourage businesses to invest in rebuilding their businesses.”
Kerr said cash handouts would get great press coverage and lift confidence out of lockdown.
“Who wouldn’t enjoy spraying a bit of cash around after such an ordeal?” he said.
Kerr has estimated a one-off payment of $1500 to all taxpayers would cost $5.8 billion.
Lesser amounts to more sharply defined taxpayer cohorts would obviously cost less.
Kerr said the payment would be most effective if it was applied when the country entered Level Two — possibly in two weeks.
“Our relatively strong starting point enables the Crown to do a lot more, in percentage terms, than most countries,” he said.
“ And any adverse impact on our relatively stronger sovereign debt market will be minimal at most, and easily managed by the RBNZ as a backstop buyer.
“A decade or so ago, the Government’s biggest mistake was to tighten the purse strings. Let’s not make the same mistake twice.”
Asked yesterday about cash handouts, Finance Minister Grant Robertson told Newstalk ZB that the Government had to examine all options to help this country get back on its feet. (Robertson called the handouts “helicopter money” )
“So things like helicopter money, as it’s sometimes called, is part of a potential package, but it does have downsides as well because it’s not particularly targeted,” Robertson said.
The Prime Minister was more cautious at her daily press conference yesterday.
“We’re in a point in the process where we are working through the range of options for making sure that we are continuing to help our economy to recover,” she said.
“And of course, the first best example of that has been the speed of the wage subsidy program. “
POLITIK understands that an extension to the wage subsidy programme is still very much on the Government’s agenda.
And Ardern’s caution about “helicopter money” yesterday would seem to confirm that.
“The Minister Finance has always been also being very quick to point out that we’ve got to make sure that what we do works,” she said.
“There are certain points in a recovery where payments like that aren’t necessarily successful or create the stimulus you want,” she said.
“But we haven’t ruled things in or out at this stage.
“We are focused on doing what will help our economy recover the fastest.
“We are focused on what is going to have the biggest effect in terms of supporting people’s livelihoods and getting our economy recovering.”
And we can expect to hear more about that next week.