The economic impact of the New Zealand fiscal stimulus package

James Giesecke and Chris Schilling

New Zealand Economic Papers, 2010, vol. 44, issue 3, 231-257

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.

Keywords: fiscal stimulus; dynamic CGE; New Zealand economy (search for similar items in EconPapers)
Date: 2010
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DOI: 10.1080/00779954.2010.522162

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