The nine day fortnight vs interest rates

The government is prepared to put up $60 each fortnight for each employee in a company with over 100 employees or more in a bid to save jobs. That would amount to a subsidy to a business taking it up of at least $3,000 / week. This is projected to cost up to NZ$20million.

Let's do some math - at risk of embarrasing myself. Give me credit for trying here.

The RBNZ says there is over NZ$90 billion ("BB1" in RBNZ-speak) in term deposits as of January '09. The terms will vary in length. If I've read the numbers right, there is another $84billion or so (BB2.4 and BB4.4) made up of deposits that aren't term deposits. Presumably they attract some interest. I think the latter pair exclude household chequing and transaction accounts.

Assuming just $100 billion in deposits attracting interest (very conservative, given the number appears to actually be $170 Billion), how much money goes up in smoke for every drop in interest rates of 1%?

$1,000,000,000 per annum.

Every 0.1% drop in interest rates is like losing $100 million / annum from the pockets of savers / people with capital.

If that number is remotely accurate (probably too low), the savers and people with 'capital' (money in the bank in huge gobs) are paying a high price, as a group, to provide cheaper credit to everyone else. It makes the $20 million the government is putting up look like.....well....very little.

The cost of the nine-day fortnight offer is further limited by the required size of the company - at least 100 employees. It would also make the number of applications easier to handle. After all, if you made it so every company with more then two employees eligible, the crash would be over before all the applications were cleared and 10,000 civil servants would need to be hired to ensure compliance.

Where I work, the $60 amount to 2 or 3 hours pay - at the very most and usually less, making this offer a 9 day, 6 hour fortnight. That would translate into maybe two long lunches each fortnight.

It looks like more of a gesture than a move of real substance.

The RBNZ's OCR cuts in recent months will have seen at least several billion dollars in interest income removed from savers over the coming two years. On the face of it, these rates cuts look contractionary.....not stimulatory.

The $20 million for the nine-day fortnight is less than 2% of the money that would be put into the hands of savers by NOT reducing interest rates by just 1%. The tax money the government would earn in tax (even if just 20%, more likely 30%) on the lost $1 billion or so in interest income would dwarf this amount.

I'm new to these stats. If I've mis-understood BB1, BB2.4 and BB4.4, I hope someone will put me right.