Downturns are common but this one is different

from Treasury in January last year, he was warned the Reserve Bank could only cut rates to roughly -0.35 before people started to hoard cash. Treasury told him he’d need to get ready to spend money to stimulate the economy, saying such spending should be ‘‘timely, targeted, and temporary’’.

He’s got other options, but these should be weighed up carefully to make sure they fit the crisis.

Economist Brad Olsen says short-term targeted wage subsidies and tax deferrals are the best immediate option as, at the moment, the key issue is ensuring businesses retain staff.

Sweeping measures such as tax cuts might be able to stimulate demand by putting money in people’s pockets, but they’re difficult to roll back after the threat recedes. People get used to a tax cut.

The Government also has to make sure any changes it makes reach the people they’re supposed to. Sometimes stimulatory tax cuts have the effect of discouraging business to put up wages, as staff feel like they’ve been given a pay rise already.

A stimulatory tax cut is also extremely expensive. National’s 2017 tax cuts of about $11 a week for workers on more than $22,000, and $20 for those on more than $52,000 a year, cost $2 billion in forgone revenue.

That’s a lot. It would give a tax cut to the 110,500 taxpayers who earn more than $150,000. Those people might not need a cut and, were they to get one, they’re more likely than low-income workers to save rather than spend it.

Economist Michael Reddell has recommended a temporary cut to the GST rate, which would have a similar effect. The Government would lose revenue, but people might be encouraged to buy more. There’s also no guarantee firms would pass on the entire tax cut.

Another popular move is ‘‘helicopter money’’, currently being tried in Hong Kong. The Government hands out money to people to spend (as if it were thrown from a helicopter).

But there are problems with this too. There’s no guarantee they’re likely to spend it – or spend it in the right places. Treasury was concerned some might splash stimulus on goods from offshore. Great news for Amazon owner Jeff Bezos, not so good for the New Zealand economy.

There is a silver lining. The Government has extraordinarily low debt, which currently sits at roughly net 20 per cent of GDP. Treasury thinks it could rise to 30 per cent of GDP in normal times, allowing a rise to 50 per cent during a crisis. Allowing debt to rise to 40 per cent would mean borrowing roughly $60 billion – an extraordinary sum, which no-one is anticipating.

Unfortunately for Robertson, the problem isn’t having money to spend, it’s how to spend it. In that sense, he’s in very uncharted territory.