Powered by momentummedia
nestegg logo
Powered by momentummedia
nestegg logo
nestegg logo

Invest

Should the government give you another $950?

By Lachlan Maddock and Cameron Micallef · October 08 2019
Reading:
egg
egg
Should the government give you another $950

Should the government give you another $950?

author image
By Lachlan Maddock and Cameron Micallef · October 08 2019
Reading:
egg
egg
Should the government give you another $950

As the Australian economy records its lowest growth rate since the global financial crisis, investors and academics are advising that “helicopter payments” may be needed to kickstart a sputtering economy.

While the Reserve Bank of Australia has hinted at quantitative easing, it might not be enough, according to Kapstream portfolio manager Daniel Siluk.

“I don’t think quantitative easing would be as effective in Australia as it has been in other economies,” Mr Siluk told nestegg’s sister publication Investor Daily.

“In the US, where mortgagees borrow 30 a year or long-term debt, QE has typically flattened curves, and a flat curve doesn’t really help a mortgagee in Australia. So, I don’t believe QE in Australia is the solution.”

Instead, the financial expert advocates for a direct cash injection similar to former prime minister Kevin Rudd’s $42 billion stimulus package that saw 8.7 million Aussies receive $950.

Advertisement
Advertisement

“A direct injection… I think that’s a more powerful tool than QE would be,” said Mr Siluk. 

Critics of direct injections

While helicopter money can potentially push economies towards hyperinflation, as it did in Zimbabwe and Argentina, the concept has plenty of friends in the mainstream. 

A report from Blackrock has made a case for the careful use of helicopter money, noting that it is difficult to “get the inflation genie back in the bottle” but that the challenging global outlook – both economic and political – could justify its use.

This was echoed by Warren Hogan, UTS executive-in-residence and former ANZ chief economist.

“I don’t think we’re going to get to that policy initiative unless we’re at a genuine crisis point,” Professor Hogan told Investor Daily. 

“In the scope of the next couple of years, if we get a global recession that sort of interacts with the weak domestic scene and it looks like we’re going into recession and unemployment is going up, that certainly is an environment where that kind of policy tool could be put on the table.”

But Professor Hogan holds that direct injection of cash into the economy would not be enough to turn things around, and says that a suite of government policies – including infrastructural spending and tax cuts – could be the way to go. 

“A direct cash handout by itself only has so much usefulness when you’re staring at a recession. It has to be a fiscal package,” he concluded.

Should the government give you another $950?
Should the government give you another $950
nestegg logo

Forward this article to a friend. Follow us on Linkedin. Join us on Facebook. Find us on Twitter for the latest updates
Rate the article

Join The Nest Egg community

We Translate Complicated Financial Jargon Into Easy-To-Understand Information For Australians

Your email address will be shared with nestegg and subject to our Privacy Policy

From the web

Recommended by Spike Native Network

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.

Copyright © 2019 MOMENTUM MEDIA