Wealthy nearly $1 trillion richer since Covid began - Hickey

Source: 1News

An economic and political commentator says since the Covid-19 pandemic reached Aotearoa, the rich have become richer and the poor have become poorer - in part due to the Government’s policies.

Bernard Hickey, writing in The Kākā newsletter, argued that - contrary to many assumptions - New Zealand’s economic response to Covid-19 was among the worst in the world in terms of widening wealth inequality and being a wasteful use of taxpayer funds.

He calculated policies like cash payments for businesses struggling through the pandemic, wage subsidies that saved business owners money, rising property and asset prices, and money printing cumulated to make the wealthy nearly $1 trillion richer.

Meanwhile, the lines for emergency food parcels continue to lengthen, Hickey told Breakfast.

He said the increase in wealth was driven largely by the more than 50 per cent increase in house prices over the past two years since the start of the pandemic.

Hickey said the Government had also given at least $20 billion in cash to businesses and asset owners, whose cash savings accounts swelled from $45 billion to $319 billion since about 2019.

“The problem with the Government’s response is it was really focused on boosting their wealth through increasing the housing market and by giving them lots of cash to ensure they kept employing the rest of the population,” he said.

“The problem is, that made the wealthier even wealthier to save the economy, rather than giving the money directly to those people who needed it the most and would have used it to repay debt and spent it.”

Policies like the wage subsidy made sense at the start of the pandemic to give businesses confidence, he said.

The Government said its economic policies relating to the pandemic was one of the reasons unemployment was at a low 3.4 per cent in the three months to September.

But, Hickey said, the issue was there wasn’t an assessment about whether a business still needed the help. The Delta outbreak saw the Government pay out more than $5.5 billion in wage subsidies, on top of the $14 billion paid last year.

“Just to be clear: Wage subsidies were not paid to workers. They were paid to business owners to offset the wages of the employees they would otherwise have made redundant, although that willingness to fire staff or the ability to use their own existing buffers was never tested,” he wrote in The Kākā.

Meanwhile, the same agency who handed out no-questions-asked grants to businesses - the Ministry of Social Development - spent a lot of time trying to get money back from beneficiaries, Hickey said.

“It’s simply a double standard.”

He noted in The Kākā: “One feature of the double standard … is that the poor notice and, understandably, are not very cooperative when the Government needs them to physically do something for society as a whole, such as get vaccinated.”

There was now what was known as the “moral hazard” that was “baked into the DNA of global capitalism”, Hickey said.

In simple terms, that meant people who owned property, shares or other assets “believed that the Government and central bank … have got your back”.

“When share prices or house prices look like they’re going to fall a bit, central banks and Governments intervene you. So, it’s a bit like a guarantee.”

He called it the “oldest trick in the history of democratic governments captured by the wealthiest owners: privatise the gains from economic growth and socialise the losses of economic shocks”.

Hickey said that was why the Prime Minister alluded to “sustained moderation” in house price growth, but would never say she wanted them to fall.

To help improve things, he said the Government should implement the suggestions of its Welfare Expert Advisory Group.