Government Covid 19 Recovery Policy Good But......
The current strategy of quantitative easing ie putting about more money is leading to greater inequality. While the wage subsidy is neutral in its effect on inequality or slightly advantageous depending on the “top up” from employers, quantitative easing is exacerbating inequality says Peter Malcolm spokesperson for ”Closing the Gap”
Banks are receiving the funds from the Reserve Bank to lend to New Zealanders. But the money is mostly going to the already rich. Banks have always lent money to those who can easily repay it and are always dis-inclined to lend to risky customers where repayments might be problematic. This prudence does mean the banks are less likely to make losses on their lending and as private sector businesses it makes sense for them to do so.
But this does not make sense where money printed is printed to expressly boost economic activity. Where banks lend to the well- heeled, the money tends to flows into investments such as property markets and the share market, all of which seem to be appreciating in value and really do nothing for the economy.
Instead of an ill-considered boost to capital markets from quantitative easing, the money would be better channelled directly into household incomes, particularly for medium and low income earners. The wage subsidies and some increases to benefits are a help but they are not enough. Direct grants to families would be a much better approach. Families that are increasingly faced with reduced incomes from redundancy and lower working hours would spend that money. It would then circulate through the economy to the ultimate benefit of increased business activity of all types.
Government, you have stressed that we are a family of 5 million and that we should look after each other. Please help those most disadvantaged says Malcolm.