News Service from House Harris

Fed: $950 payments to be "blown on pokies, plasmas": economists

CANBERRA, Feb 9 AAP - Economists have raised concerns the federal government's cash hand-outs to millions of people will be blown on pokies and plasma televisions.

The government wants to give out payments of up to $950 to individuals as part of its $42 billion economic rescue package.

But economists have told a Senate enquiry that $42 billion is too much money, and the hand-outs would be wasted.

Reserve Bank board member Warwick McKibbon called for the payments to be scrapped.

"A cash payment ... only has the potential to temporarily stimulate demand and has no long-run benefits to the economy," Professor McKibbon, an economist, told the inquiry on Monday evening.

He said it would be better to bring forward tax cuts or temporarily cut the GST than to hand out money.

Prof McKibbon, who said he was putting forward his own views and not those of the Reserve Bank of Australia (RBA), said the $42 billion package was "too large".

Sinclair Davidson, professor of economics at RMIT, slammed the hand-outs.

"Do we believe that Australians have not been borrowing and spending enough on alcohol, pokies and tobacco, and that there aren't enough plasma televisions around?" he asked the inquiry.

"This particular package has got a very low bang for buck, and there are certainly (a) substantial amount of bucks involved in the project."

Prof Davidson said it could not be expected that the stimulus package would succeed.

The government should not proceed with it, and there was no need to rush such a large amount of money through the parliament, he said.

He said tax cuts or a "GST holiday" would be a better way to stimulate the economy in tough times.

The federal opposition opposes the package and says tax cuts are a better option.