Cash handouts not best way to stimulate economy: IMF

The International Monetary Fund (IMF) says cash bonus payments are not necessarily a very useful way to stimulate the economy.

The Federal Government has spent just under $21 billion on cash handouts as part of its two economic stimulus packages.

But the IMF's chief economist, Olivier Blanchard, has told ABC1's 7:30 Report that speeding up infrastructure projects is a better way to stimulate economies during a recession.

"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," he said.

"They may feel good about it, but in terms of what this does to the economy it's not very good. 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."

Speeding up infrastructure
Meanwhile the IMF says the predicted length of the global recession will make infrastructure projects the ideal way to stimulate the economy.

Mr Blanchard says governments should be bringing forward infrastructure projects that are scheduled to begin in several years' time.

"Typically with these type of measures, is that it takes so long to actually get them going that by the time you put them in place, the recession is gone," he said.

"Well we're unlucky that this time we have a long recession, a slow recovery, so even these projects can be thought about and started now." link...