Call to consider ‘helicopter money’
AN economist says Britain’s helicopter money to boost business could be introduced in New Zealand as the full impact of the economic downturn hits.
Chancellor of the Exchequer Rishi Sunak last week announced that the UK government would introduce an ‘‘eat out to help out’’ discount throughout August that equates to a 50% reduction for sitdown meals at pubs and restaurants to help the struggling high street.
The move would help to protect 1.8 million jobs, Mr Sunak said, as part of a £30 billion ($NZ57 billion) plan designed to rescue the UK economy.
This followed an earlier proposal in Britain dubbed the ‘‘£500 shopping initiative’’ which proposed to give adults a ‘‘free’’ £500 voucher and children a £250 voucher as a way to kickstart the economy and incentivise spending.
The government of Jersey has announced a diluted version of this — it plans to give £100 ($190) worth of vouchers to its residents to kick start the Channel Island’s economy.
Retail NZ would like to see a similar initiative or some form of helicopter money pumped into the New Zealand economy to encourage spending and to help the sectors hardest hit by Covid19.
While June proved to be a strong month for retail spending — card spending was about 6% above where it was prior to lockdown — this is expected to be shortlived.
ASB senior economist Mike Jones said helicopter money was often an effective shortterm fix for struggling economies, but noted that New Zealanders were not struggling to find their credit cards like those in Britain were.
‘‘A cash splash, helicopter moneytype solution probably is something [the] Government should keep up their sleeves for a rainy day — it is quite effective in terms of getting money into people’s pockets and money into the economy as quickly as possible,’’ Mr Jones said.
An ‘‘emergency measure’’, it was not needed, as New Zealand was experiencing a ‘‘sugar rush’’ due to pentup demand, he said.
‘‘The better and more sustainable solution is a focus on jobs. The problem with helicopter money is it is great, but it is very much a one and done — the cash gets spent and it’s gone.
‘‘If you focus on jobs and people have an income then it is a much more sustainable way to keep the economy and retail spending going.’’
The timing also had to be right to successfully inject helicopter money into the economy during a downturn, he said.
Spending is expected to drop again after the bulk of the wage subsidies end in September. A second wave of mass redundancies is expected.
Mr Jones said economists anticipated retail spending would ‘‘cool off quite rapidly’’ in the second part of the year.
‘‘If we do see risks of double dipping recessions and such, then it is something that could be employed for a quick boost in economic activity.’’
Retail NZ chief executive Greg Harford said the sector would like to see some form of free money given out either as oneoff grants, reduced GST or reduced income tax.
‘‘I think there is real merit in the Government considering the idea. . .’’ Harford said.
‘‘The risk is if you give people money they may just save it or use it to repay debt, but if it was done in a way that could only be used at retail and hospitality outlets, for example, then that would be very beneficial.’’
A helicopter money incentive would ‘‘keep consumers spending when the downturn becomes worse in a few months time’’ and would in turn help retain jobs, he said.
Boost for the regions
Retail analyst Chris Wilkinson, managing director of First Retail Group, said a voucher spending scheme rolled out in New Zealand over the next six to 12 months, perhaps even specifically for the regions more affected by the pandemic than others, could be very beneficial for the wider economy.
While New Zealand’s retail, arts and hospitality sectors have been nowhere near as impacted as those in Britain, such a scheme could be an option for the Government to consider
‘‘It doesn’t necessarily need to be a New Zealandwide initiative, but it could be specific to regions,’’ Mr Wilkinson said.
‘‘We still remain in a bubble at the moment but I think it is universally accepted that the challenges are still ahead, and [helicopter money] needs to be part of an economic development response that can be available as we start to see situations of extreme distress.’’ — The New Zealand Herald