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Coronavirus: Cash payments to citizens 'can't be ruled out'

Catherine Harris

"Helicopter money" – cash payments to all citizens – cannot be ruled out in New Zealand's current coronavirus crisis, a fund manager believes.

Matthew Goodson, co-managing director of Salt Funds Management, said he would not rule out the Government handing out untagged cash to its citizens, echoing a huge relief package in the US.

President Trump has approved an historic aid package which included direct payments of $1200 to most American adults earning US$75,000 or less, and US$500 per child.

Goodson said the Reserve Bank had "very much come to the party," keeping credit flowing with its bond purchasing programme and term loan facilities to banks.

The difficulty was translating that from the financial markets to the real economy, and into people's hands.

Goodson said he was in no doubt the current crisis was "going to be an economic shock rivalling the Great Depression" and coming out of lockdown would be a "balancing act".

"Because you can't stay in lockdown forever, because unemployment kills people too. 

"So that's going to be a key question for financial markets, is at what point does Government start to shift that balance a little bit."

Brad Olsen, a senior economist with Infometrics, said he felt there was a case for helicopter money, such as a one-off tax rebate, but not right now.

"With New Zealand still in a lockdown, people have nothing to spend on aside from food and essential items, but once we come out of lockdown is where the assistance is best targeted to get the maximum impact into the economy."

"Post-lockdown, I'd expect that households will be much more cautious about their spending, and will cut back spending to only the essentials." 

Helicopter money would be helpful in encouraging people back into discretionary spending such as eating out, movies and trips away.

At the moment, however, Olsen said the Government's stimulus was focused rightly on keeping people in work, "essentially keeping the economy on life support".

At Alert Level 2 and 3 there would be a period of adjustment and after the lockdown, there would be a recovery phase, and "that's where a focus on getting households to spend more becomes most important".

Finance Minister Grant Robertson told Stuff that the Government had already plunged a lot of support via wage subsidies and support for vulnerable workers, but did not rule out further assistance.

"As we position for the economic recovery, we are looking into a range of future options to support individuals, businesses and sectors."

Political economist Associate Professor Brian Roper of Otago University said it was important to remember that the pandemic was not going to last forever.

"It's only going to last for a couple of years.

"But the economic ramifications are likely to be felt for at least a decade down the track, especially taking into account the increase in government debt.

"And following that, what's going to have to be a sustained period of austerity to pay that debt down."

Roper believes the global economy was already vulnerable before Covid-19 came along, with share prices out of sync with low levels of economic growth.

"Bull runs don't last forever. I think Wall St was overdue for a crash anyhow." 

That was partly due to factors that had underpinned the global financial crisis in 2008 never truly going away. Big surges in property prices and high levels of global debt had preceded the GFC as well. "As the IMF pointed out, in 2016 global debt reached its highest point in human history. A lot of those trends were just playing out again."


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