Thursday, November 6, 2008

$500 transfer - what multiplier effect?

The Maori Party have advocated a one-off transfer to families of children living in poverty. In itself I have no major issue with this. I would have liked to see a little more detail on the thinking behind this move though. It's a lump sum transfer and should be recognised as such. The question is whether the intention of the transfer has been clearly laid out and whether any real analysis has been done on how it would achieve its objective.

I was somewhat dismayed by Peter Sharples using the term "multiplier effect" on radio and in the presser. No, Peter, there is no real multiplier effect here because it is one-off. First of all, don't even think of bringing retailers into the equation. They are not going to respond to such a small amount by increasing orders - not least because the orders for the Christmas period were likely placed months ago. Second, if shopkeepers believe this is a one-off then why should they change behaviour? The size of the transer is so small that it is not going to add to employment, and therefore will not add to expenditure over and above the initial sum. Your multiplier, Peter, is bogus. Please try to get a proper economist into the Maori Party.

1 comment:

Matt Nolan said...

You have been tagged: