The International Monetary Fund (IMF) says cash bonus payments are not the best way to stimulate the economy.
The IMF’s comments come after many countries including Australia, the US and China have implemented their own stimulus packages to in order to help boost the economy.
The Australian Federal Government has just spent $21 million on the recent cash handouts, with the impact yet to be felt.
IMF chief economist, Olivier Blanchard, said that speeding up infrastructure projects is a better way to stimulate the economy during a recession. He said that stimulus payments are not the most effective solution as the Government cannot guarantee it will be spent as intended.
“If people were to spend it, it would be great. The main problem is basically at this stage, we think if we put money randomly in people’s pockets they’re going to save most of it.”
“At this stage what we need is an increase in demand so you basically want to put the money where it’s going to be spent.”
Federal Opposition leader Malcolm Turnbull was quick to seize on the comments, having long been opposed to the Rudd Government’s cash handouts.
“Olivier Blanchard makes the point, as we have made, that if you simply put out cash randomly, have big cash splashes, in a climate like this, people will save it rather than spend it.”
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