Mike's Minute: Is Labour's cash bonanza economically smart? No. Is it Politically? Maybe

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Recorded13 Mar 2023

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Quick question around the cash bonanza yesterday - is it so blatant that it might actually work? An extra $300 million we don't have, just splashed all over the economy as part of a $2 billion package, made up of stuff that got cancelled. They are doing it because we have a cost-of-living crisis and we have a cost-of-living crisis because they overreacted to Covid. It's very likely that on Thursday when the official GDP number is published, that we are entering a recession. In fact, it is likely we are already in one. As a result, everyone feels the pinch and wants more money and Santa Hipkins is available to scratch that itch. Politically, you understand it. The same way depositors ran for the SVB bank over the weekend, the cold hard reality of human nature is it is every man for himself. People all over the country will quietly justify receiving the extra money. They'll say they deserve it, they've paid their taxes, tomatoes are too expensive - pick a reason. The fact we don't have the money can be dismissed as someone else's problem. The fact it's all going to the non-productive side of the economy will be justified because it will be spent. Yes, it will be spent, the same way all the money they handed out in Covid was spent. It's not hard to hand out fake money to spend. But it doesn't solve our problem and in that is the crime. But it's only a crime if we agree it's a crime. If we agree it's fun and a shopping expedition, then that potentially leads to votes, based on the idea that a sugar hit of free cash can be dealt to another day. National and ACT are stuck. Are they the parties to take the money back? To cut the poor beneficiaries wages? 1.4 million of us will get some of this largesse. And if most people don't truly get why we are in the hole we are, it all seems to make sense. Until, of course, it all comes home to roost, which it is starting to. But October may well be close enough to avoid the trick being blown. Or maybe the money is good enough for people to not even care.See omnystudio.com/listener for privacy information.

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