Recently released unemployment figures show that New Zealand is living on a form of economic morphine, that is insulating us against the full force of the economic crisis that’s hitting the global economy, National Party Leader Judith Collins says.
“Tens of billions of dollars of fiscal and monetary stimulus have been deployed to hold off a collapse in employment.
“This level of expenditure cannot continue indefinitely.
“Over $13 billion has been pumped into our economy through the wage subsidy, to give businesses a chance to get to reorganise and prepare for a new business environment.”
“The wage subsidy was a helpful tool to help Kiwi businesses get through the lockdown. When launched, it was seen as a temporary measure which could last some months.
“Over the next few weeks the wage subsidy will come to an end and the tap will begin to run dry.”
This is in addition to programmes like the Small Business Cash-flow Scheme which has paid out over $1.5 billion.
“Today, with our border closed for the foreseeable future and a deteriorating global economic outlook, we have to face the reality that our economic situation could significantly decline.”
“It should not be forgotten that this stimulus has been borrowed and will be paid off over coming decades.
“The government expenditure to prop up the economy is coming at a very significant cost. We are borrowing over $1.5 billion every week to pay the bills.”
This massive fiscal stimulus is matched by dramatic and aggressive moves by the Reserve Bank to insulate the economic shock.
In March, it dropped the Official Cash Rate to a record low 0.25%.
This is teamed with its unconventional monetary response – the Large Scale Asset Purchases programme – which bought nearly $1 billion worth of government bonds, last week alone. This is part of a $60 billion dollar stimulus that has been underway since 25 March 2020.
“New Zealand needs a better economic plan, one that relies on building a stronger economy rather than borrowed money and hope.”
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