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The economic impact of the New Zealand fiscal stimulus package

  • James Giesecke
  • Chris Schilling

Unlike many countries affected by the global financial crisis, New Zealand did not announce a formal fiscal stimulus package. However, via a series of policy announcements beginning in October 2008, by March 2009 the government budget balance had moved towards deficit by 1.6% of 2011 GDP. We interpret this discretionary movement towards deficit as New Zealand's fiscal stimulus package. The package largely comprises three policies: cuts to personal income taxes, cuts to business taxes, and infrastructure spending. We investigate the individual and joint effects of these policies using a dynamic CGE model of the New Zealand economy. We find that the package has a small positive effect on short-run employment, but at a cost to long-run real consumption. We examine an alternative package, which generates a larger short-run employment gain, for a similar long-run real consumption cost.

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Article provided by Taylor & Francis Journals in its journal New Zealand Economic Papers.

Volume (Year): 44 (2010)
Issue (Month): 3 ()
Pages: 231-257

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Handle: RePEc:taf:nzecpp:v:44:y:2010:i:3:p:231-257
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