The Government needs to make its COVID-19 economic stimulus package at least five times bigger to give New Zealand a chance of keeping unemployment to single digits, a top economist says.
Last month, the Finance Minister unveiled a $12.1 billion financial aid package - the majority of which was made up of wage subsidies - to help businesses stay afloat during the coronavirus crisis.
But Shamubeel Eaqub, a leading Kiwi economist, says that package now needs to be worth an eye-watering $60-$80 billion to get us out of the deep financial rut the COVID-19 outbreak has caused.
"When we think about the size of the stimulus on the other side, when we're coming out of the recession - it needs to be pretty big, and clearly what they're talking about is not enough," he told Newshub.
"Even if you increase the total stimulus to $40 billion, it's still not enough - I would've thought we'd need to increase that number by $20-$40 billion.
"On the public health front, we're probably being the most aggressive country around the world... while our economic response - while very, very large at the time it was announced - looks very, very small compared to what other countries are doing."
Eaqub's comments come after the Treasury Department released a series of scenarios on Tuesday that showed unemployment could surge as high as 26 percent if the coronavirus lockdown is extended beyond four weeks.
While it mostly made grim reading, it also showed that unemployment can be kept below 10 percent - and return to 5 percent next year - if the Government is willing to provide additional financial support.
"The bigger and more effective the stimulus - those two things are important - the lesser the impact [on the economy]," Eaqub said.
"Right now, the priority should be to really go hard in supporting businesses - particularly SMEs [small and medium enterprises] - to make sure those businesses don't fail and those jobs are retained."
Eaqub says the worst approach the Government could take now is to be timid in the face of the economic challenges COVID-19 has presented.
That view is shared by National's finance spokesperson Paul Goldsmith, who said the "terrifying" Treasury scenarios prove the Government "cannot be ultra-cautious coming out of lockdown".
The only way forward now, Eaqub believes, is major targeted financial aid for businesses - or the Government should prepare for a new crisis: mass unemployment.
"Essentially the alternative is we go through a downturn where we have a massive increase in unemployment - the likes of which we haven't seen since the Great Depression," he said.
"And unemployment has a very scarring effect on the economy… because people are disengaged and don't have the resources to start businesses and those kinds of things."
COVID-19 continues to have a dramatic impact on the economy. On Tuesday morning alone, media company NZME announced it would be culling 200 jobs and Burger King revealed it would be placed into receivership.