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The economic impact of the New Zealand fiscal stimulus package

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  • James Giesecke
  • Chris Schilling

Abstract

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.

Suggested Citation

  • James Giesecke & Chris Schilling, 2010. "The economic impact of the New Zealand fiscal stimulus package," New Zealand Economic Papers, Taylor & Francis Journals, vol. 44(3), pages 231-257.
    • Handle: RePEc:taf:nzecpp:v:44:y:2010:i:3:p:231-257
    DOI: 10.1080/00779954.2010.522162
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    References listed on IDEAS

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    1. Campbell, Sean D. & Sharpe, Steven A., 2009. "Anchoring Bias in Consensus Forecasts and Its Effect on Market Prices," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 44(2), pages 369-390, April.
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    1. Ruhul Amin & Nahian Rahman & Samira Tasnim & Sima Rani Dey & Mohammad Tareque, 2024. "The Impact of the Stimulus Packages on the Economy during COVID-19 in Bangladesh: A Mixed-Method Approach," Economies, MDPI, vol. 12(5), pages 1-25, May.
    2. Richard Fabling & David C. Maré, 2012. "Cyclical Labour Market Adjustment in New Zealand: The Response of Firms to the Global Financial Crisis and its Implications for Workers," Working Papers 12_04, Motu Economic and Public Policy Research.
    3. Budy P. Resosudarmo & Abdurohman & Arief A. Yusuf & Djoni Hartono, 2021. "Spatial impacts of fiscal stimulus policies during the 2009 global financial crisis in Indonesia," Asia-Pacific Journal of Regional Science, Springer, vol. 5(1), pages 305-326, February.

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