Responding to the Reserve Bank of New Zealand’s decision to expand its Large Scale Asset Purchase programme from $60 billion to $100 billion, New Zealand Taxpayers’ Union Economic Advisor Karan Menon says:“
The Reserve Bank has just announced a $40 billion expansion of its money-printing programme. In other words, cuts to the official cash rate have become ineffective for stimulus, and the Reserve Bank is resorting to desperate measures.”
“Monetary policy interventions are clearly failing to spur spending in the economy. This failure will become critical as eligibility for the Wage Subsidy ends, and businesses begin cutting work hours, or shutting shop.”
“In fact, the Reserve Bank's statement even alludes to the fact that fiscal policy is currently more relevant to economic stimulus than monetary policy. One effective response would be to temporarily cut GST to encourage New Zealanders to bring forward spending. That’s an idea suggested last year by the International Monetary Fund, and deployed successfully in the United Kingdom during the Global Financial Crisis.”
The Taxpayers’ Union has released a briefing paper on the GST reduction proposal here: www.taxpayers.org.nz/gst_cut.