The Prime Minister is not ruling out the prospect of one-off cash injections for Kiwis to help stimulate the economy during the COVID-19 crisis, but says something like that would have to be done at the right time.
The idea has been floated by Kiwibank economists who say cash hand-outs will "get great press coverage and lift confidence out of lockdown" as New Zealand shifts into alert level 3 on Tuesday next week.
The economists suggested cash hand-outs of $1500 per adult and $500 per child to be spent with domestic tourism operators, for example, who have been hit hard by the huge drop in international tourism.
"Instead of cash, domestic tourism and retail coupons or vouchers could be offered to high income households. Use it or lose it. It would also limit the leakage on spending on imports."
Prime Minister Jacinda Ardern said the Government is working through a range of options to continue to help the economy recover and highlighted the wage subsidy scheme which has so far paid out more than $10 billion.
"We haven't ruled things in or out at this stage. We are focused on doing what will help our economy recover the fastest," Ardern told reporters.
"We've got to make sure that what we do works. There are certain points in a recovery where payments like that aren't necessarily successful or create the stimulus you want."
Finance Minister Grant Robertson told Magic Talk there are advantages and disadvantages to the approach. He echoed the Prime Minister saying sending cash to Kiwis would need to be done at the right time.
"That's an idea that has been proposed and I've been very clear I'm not taking ideas off the table at the moment. But right now it's hard for people to even be able to spend money and at the moment people are going to be very cautious."
Budget 2020 will be announced next month and Robertson said it will focus on the Government's response to the COVID-19 crisis to "immediately cushion the blow" but will also "help sectors around their recovery plans".
"We need to understand the full impact of this before we start taking major initiatives that will shift the dial on the economy, in the area of stimulus, for example."
National's finance spokesperson Paul Goldsmith is urging the Government not to rush the idea of one-off payments that have been labelled "helicopter money".
Goldsmith said before Robertson "tosses the bundles of cash from the chopper", he needs to "acknowledge the immediate focus right now should be on business relief".
ANZ is predicting 11 percent unemployment, a 22-23 percent drop in GDP in the first six months of the year, 10 percent lower for the full year, and house prices to drop 10-15 percent.
Robertson said the Government has been "upfront from the beginning that this is going to be a difficult time for the New Zealand economy, just as it is for all economies around the world".
He said some of ANZ's numbers are similar to the scenarios that Treasury put out last week, but that the Government is hoping to keep unemployment below 10 percent.
"When it comes to the overall growth numbers for the quarter, they are similar to what Treasury forecasted but a bit higher for the year," he said.
"The good news is our economy was robust going in and so that gives us the best chance of success coming out the other side along with all the interventions we're putting in place."
He pointed to New Zealand's low Crown debt which at the end of February was $600 million below forecast at 19.2 percent of GDP, compared with the UK at around 75 percent, the US above 80 percent, and Italy above 120 percent.
In May 2019, the Government lifted its Crown debt target by 5 percent to have more financial flexibility, with aim of keeping it at between 15-25 percent of GDP. But Robertson said because of the COVID-19 crisis, Crown debt will be "in excess of that".
Nevertheless, he said New Zealand is "pretty unique and privileged in the world" to be able to spend the billions of dollars it has by "coming from a good starting point".
Cabinet has not yet decided how it will pay for the billions of dollars borrowed to fight COVID-19.
