Economists have criticized the New South Wales government’s latest use of vouchers to stimulate economic activity amid rising inflation, questioning whether their ongoing use has more to do with “retail politics” than sound public policy.
In one of the only surprises announced in last Tuesday’s NSW budget, the treasurer, Matt Kean, revealed families would be handed $150 vouchers for every child enrolled in School, just months out from the state election.
The $193m scheme is the latest in a series of voucher programs introduced by the Coalition government in recent years, covering everything from children’s sports and art classes to the millions spent after Covid lockdowns to encourage people to spend up at restaurants, cultural experiences and on trips to the country.
Eight voucher programs are running in NSW, with another two yet to begin. Dine and Discover vouchers expire on Thursday.
Asked about last week’s school vouchers, which are expected to cover things like uniforms and stationery, the Grattan Institute’s economic policy director, Brendan Coates, said it was “very strange” to be handing consumers more purchasing power when inflation was rising, and the state was in record debt.
“In a world where the economy is at full potential, we’ve got inflation running potentially to 7%, it doesn’t seem like a smart move to put more money into the pockets of consumers,” he said.
“That contradicts what the Reserve Bank is trying to do.”
Coates said he could, however, see the political appeal in reminding people that the government was providing the funds every time they used a voucher.
“[Vouchers] are very good retail politics,” he said.
“It’s just a much more salient way people will be reminded of that support that’s been given to them than if they put another half a billion dollars into the childcare system.”
In the 2017 budget, then treasurer Dominic Perrottet introduced $100 vouchers for every school-age child to reduce the cost of sports registration or membership fees. Since then, 5.1m of those vouchers have been issued, and 4.2m have been redeemed. The most recent budget included another $116.5m for the scheme to continue.
Subsequent programs have included Creative Kids vouchers, Before After School Care vouchers, and First Lap swimming vouchers. The swimming vouchers were introduced in December, but fewer than 140,000 of 540,000 eligible families had used the scheme, according to data released to the Guardian just days before the first round was due to close. A second round will begin on 1 July.
There were more than 12m unspent Dine and Discover vouchers – totaling $300m – still to be spent as of last Friday. The government noted the average spend for each $25 coupon was $42.
The chief economist at the Australia Institute, Richard Denniss, said he suspected a forecast underspend was built into every scheme.
“It gives you the appearance of generosity, knowing that a whole bunch of people will be too busy or too confused or overwhelmed to take up the opportunity,” Dennis said.
He said the schemes were often hard to access for some multicultural communities, and handing out cash, rather than vouchers, would have better take-up.
“There’s no economic case for it,” he said. “It’s a purely political case.
“If you wanted to target disadvantaged groups, I’d suggest a complicated voucher is far less efficient and equitable than a simple cash grant.”
Many industry groups have come out supporting vouchers, including the Dine and Discover scheme, saying it has contributed to their viability and boosted consumer confidence during the pandemic.
Tourism Accommodation Australia’s chief executive, Michael Johnson, said earlier this month that the vouchers generated much business.
“You’ve got that extra money in your pocket to spend on things like dinner or breakfast or other items to ensure that you have a good holiday,” he said.
The NSW opposition leader, Chris Minns, urged the government to look critically at the schemes while encouraging people to get out and spend their vouchers before expiration.
“There’s a bit of a pattern here when it comes to some of these grant programs that the NSW government has rolled out, it’s a big-spending media release, but in the back of their minds, they seem to know that there’ll be a huge under subscription,” he said last week.
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The NSW customer service minister, Victor Dominello, said vouchers provided households “hip pocket relief”.
“The government’s various voucher programs have [been] well received by the community with satisfaction rates for customers and providers well above 95%,” he said.
NSW voucher programs
Dine NSW – three $25 vouchers for hospitality venues or takeaway meals (expiring Thursday, 30 June).
Discover NSW – three $25 vouchers for entertainment and recreation (expiring Thursday, 30 June).
Stay NSW – a $50 voucher towards accommodation at some businesses (expiring 9 October).
Parents NSW – five $50 vouchers a household as a “reward” for supervising home learning in 2021. The vouchers can be used at Discover NSW and Stay NSW providers (expiring 9 October).
First Lap learn to swim – a $100 voucher for parents of children 3 to 6 years old not yet enrolled in School for swimming lessons (expiring Thursday, 30 June, but then a second round will begin).
Active Kids – two $100 vouchers towards the cost of sporting activities.
Creative Kids – a $ 100-a-year voucher for each student towards creative activities, including drama and art.
Before and After School Care – a $500 voucher for each child for before and after school care services.
Sydney CBD Friday (yet to begin) – four $25 vouchers to use at dining and entertainment venues in the CBD on Fridays.
Back to School (yet to begin) – a $150 subsidy for each child at primary or secondary School in NSW in 2023.