Economist says Govt could print money to save businesses from financial crisis

By Jessica Tyson

According to an economist, the New Zealand Government has the ability to print money, which he believes could be the answer to financially supporting business and whānau affected by the COVID-19 lockdown.

Economist and research director of BERL, Ganesh Nana spoke about the topic to Tapatahi today.

He says its a big misunderstanding of New Zealanders who believe that the government can’t do things, that it’s not allowed to do things and it doesn’t have the money to do things.

“Well actually it does. The government can, I don’t want to get too technical but, can literally print money and now is the time it needs to do that.”

However, he says there would be consequences around printing money and the impact would depend on what the money would be used for.

“The important thing is making it available to those who need it rather than as it has done in previous times, print money and give it, dear I say it, to the wrong people.

“We need to ensure that that money is channelled towards small businesses, to those entrepreneurs who can keep their businesses going and provide jobs and ensure that family and whanau have income support food on the table.”

He says printing money is “in the text box and is not radical”.

“There is in the context of the scenario that Treasury were painting yesterday. There is no shortage of money that the government could get hold off to ensure that most of the New Zealand businesses can stay functioning.”

Yesterday the Treasury announced scenarios about job losses as a result of COVID-19 that could see unemployment rise, somewhere between just under 10 percent, to as high as 26 percent.

Before COVID-19, unemployment was four percent but 8.4 percent for Māori.

“This is a significant serious situation we are in but there’s a good side, says Nana.

“There are a lot of supports out there, Government and indeed banks are out there willing and able to offer that support so I don’t think we should be feeling alone.”

Finance Minister Grant Robertson says the next steps in the Government’s plan to support businesses will be released later this week.

The Government has already provided support to businesses including:

  • $9.6 billion through the wage subsidy to protect the jobs of over a million working New Zealanders and keep them connected to their employers during the lockdown.
  • $3 billion support package for small businesses
  • Changes to the business tax system worth $2.8 billion to boost cashflow, encourage investment, and support working from home, including:
  • Allowing businesses to immediately claim tax deductions for low value assets like computers, mobile phones, cameras, microphones, headphones and other equipment required to work from home
  • Raising the threshold for provisional tax to support cashflow
  • Writing off penalties for late tax payments to take pressure off business owners
  • Restoring the ability to depreciate some buildings to support cashflow and investment
  • Working with the banks to deliver a six-month mortgage deferral scheme so Kiwis don’t lose their homes as a result of COVID-19, and a $6.25 billion Business Finance Guarantee to encourage bank lending to small and medium-sized businesses.