Economic support measures such as wage subsidies and tax cuts are "wasteful", according to former Finance Minister and Labour MP Sir Roger Douglas.
Helicopter payments, wage subsidies and broad-based tax cuts, such as a moratorium on GST, were described as "poorly targeted support" in a new discussion paper co-authored by Douglas and Robert MacCulloch, a business and economics professor at the University of Auckland and a research fellow at IZA.
The Government's measures will "only serve to entrench inequalities that existed prior to the pandemic", Douglas argues, saddling younger generations with debt that "impinges upon their prosperity, and quality of life, for decades to come".
It's imperative that the Government organises a clear framework for recovery post-COVID, Douglas says, prioritising and targeting spending so it reaches those most in need rather than being spread more generally via helicopter payments, "falling into the pockets of those who are able to care for themselves".
"It is also why we must look to eliminate privilege and waste, both of which have been part of New Zealand's economy for too long. In total, there are $15-16 billion dollars of savings we might make per annum, simply by removing unnecessary government spending," says the paper.
Douglas, who served as an MP between 1969 and 1990 and Finance Minister from 1984 to 1988, was particularly critical of the wage subsidy scheme's distribution of money to large corporations, arguing that financial support should have been reserved solely for workers and small businesses.
"While the scheme, which already comes at a cost of $10 billion, has undoubtedly provided short term support to those who needed it - workers and small businesses - it has also been used to prop up corporate monoliths and institutions who should have been left to fend for themselves or - at the very least - should have received assistance in the form of a loan, instead of a handout," he wrote.
The Warehouse Group, which made an after-tax profit of $74 million last year, was capable of "look[ing] after itself during the lockdown" or taking out a loan, the paper argues, but instead was permitted access to a wage subsidy.
Partners in affluent law firms like Simpson Grierson, Bell Gully and Minter Ellison were also recipients of wage subsidies, despite years of reaping the benefits of six or seven-figure salaries.
Instead, the report calls for payments to be specifically tailored to individual workers, customised to meet their specific needs rather than doled out in large sums to employers.
Small businesses should be granted access to Government-provided consultants to assist them through this time of crisis, the report argues, and become eligible for a tailored loan if they are unable to access "liquidity and other sources of capital".
'Now is not the time for new infrastructure projects'
The Government is pushing for new 'shovel-ready' infrastructure projects to be fast-tracked, largely bypassing the Resource Management Act (RMA), in order to boost the economy. Projects such as roading and rail would benefit from fast-tracked consenting, Trade and Export Growth Minister David Parker said on Sunday, with transport and housing the top priorities under the Cabinet-approved act.
In April, the Green Party suggested a fast, intercity rail could be prioritised post-COVID as a climate-friendly, job-creating project. The party is pushing for significant investment over 10 years to roll out fast, electric passenger services connecting key provincial centres with Auckland, Wellington and Christchurch. Party leader James Shaw said building rail creates more jobs than building motorways and helps tackle climate change simultaneously.
However, new infrastructure projects will do little to address unemployment, according to Douglas and MacCulloch, as the crisis is not affecting unskilled workers who can be offered jobs in new construction projects. The crisis, he says, is impacting skilled workers such as chefs and florists, who simply wish to return to their profession rather than swap their spatula for a shovel.
"A new, improved highway between Christchurch and Dunedin, or a fast-train link between Hamilton and Auckland, is of no immediate benefit to the café owner in Whangarei, the florist in Kerikeri, or the pet shop owner in Blenheim, whose very livelihoods are threatened," says the report.
"They - and the people they employ - instead need real, generous, and targeted Government assistance to help get them back on their feet and keep them in work."