Wage subsidy impacts

The Reserve Bank created $50 billion to support the economy and part of this was used for the wage subsidy but about $20 billion was overpaid.  This money was used to push up the prices of houses and assets and this created inflation. Now rents and mortgage costs have increased and other factors are causing prices to rise.

On 7 December 2021 well known economist and financial journalist, Bernard Hickey, wrote an article for The Spinoff and said that “New Zealand’s economic response to Covid was among the worst in the world in terms of widening wealth inequality and the wasteful use of taxpayer funds.  Asset owners’ wealth is on track to rise by $872 billion or 50% to $2.63 trillion within two years of the outbreak.   Working families and beneficiaries who pay rent are now mostly worse off or barely treading water”    


On 26 January 2022 he wrote another article with a lot more information from Statistics New Zealand. The well off are $952,000 million better off than in March 2020 but, in contrast,  payments to beneficiaries increased by $48 million and they borrowed an extra $400 million from the MSD.


On 3 February the Government announced the easing of border restrictions for various categories. Bernard Hickey wrote that the Government had given in to employers wanting cheap migrant labour  and said that “the risks of worsening the peak of any outbreak through March and April have increased, along with a risk of a return to the old easy growth model of pumping up total nominal GDP, exploding house prices and weak real wage growth.”

The top priority for political parties is to get a lot of money for social media and election campaigns so that they can obtain or retain power. This money has to come from those who are well off so political parties have refrained from saying anything about the above.

The Prime Minister and Labour Party said that they wanted to make big improvements in the areas of child poverty, inequality, unaffordable housing, freshwater  and climate change but they have ended up doing almost the opposite. Treasury and MSD officials were keen to give businesses as much taxpayer money as possible so they arranged for this to happen and have failed to comply with Auditor-General recommendations relating to repayments and prosecutions. The Treasury has now advised the government to cut spending so this means that urgent social and environmental projects will not be able to go ahead.    

It appears that the uncontrolled lobbying of officials and Ministers together with large political party donations and the other activities of business interests have come ahead of the best intentions of the Prime Minister and Government.

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