Top financial officials explored a scheme which would have seen the Government paying for part of people's meals if they went out to eat.
But the Treasury ultimately decided against the idea as incentivising people to go out to eat would "run counter to the public health goals" at higher alert levels.
Instead, the Government decided on the resurgence support payment scheme, which grants eligible Covid-hit businesses access to a $1500 lump sum, plus $400 per full-time employee.
That scheme is likely to cost the Government an estimated $320 million.
But the Restaurant Association is calling for the Government to adopt the scheme to help embattled businesses.
A just-released Regulatory Impact Statement (RIS) reveals officials explored implementing an "Eat Out to Help Out" scheme, similar to the one in the UK.
That policy saw the UK Government subsidise up to 50 per cent of someone's meal bill; it was implemented as a way to incentivise people going out to eat and helping struggling restaurants and cafes.
According to the Guardian, more than 49,000 businesses claimed for the scheme which cost £849m (roughly $1.6 billion) over the month it was in place.
But a research paper, written by University of Warwick economist Thiemo Fetzer, said the scheme could have caused six Covid-19 clusters. The UK Treasury rejected this finding.
New Zealand Treasury officials, however, clearly took the research into consideration when rejecting the policy back home.
"It was concluded that the scheme would run counter to the public health goals at higher alert levels to subsidise and therefore incentivise eating out."
But Restaurant Association chief executive Marisa Bidois said that a similar scheme was needed in New Zealand.
"Our proposal was for the scheme to be launched at alert level 1 and also during traditionally quieter periods for our sector, with these months even more challenging due to the effects of the pandemic It was to sit alongside a number of other initiatives proposed by the Association designed to support the sector."
Hospitality NZ chief executive Julie White said although this scheme would have helped some struggling restaurants in New Zealand, it would not have been a "silver bullet".
Rather, she called on the Government to provide more targeted support to hard-hit hospitality businesses.
The resurgence support payment was very helpful, she said, but many hospitality businesses are still reeling.
For example, the lockdown over Chinese New Year would have set some restaurants back many thousands of dollars and the support payment would not cover those costs.
"I don't think it should be a blanket approach … We definitely think there should be a hospitality support package."
The RIS also revealed that Treasury officials had a number of concerns about the resurgence support payment scheme.
These include the fact that it could "incentivise them [businesses] to get rid of staff in order to become eligible" for the scheme.
The RIS said: "This could make it harder for these firms to survive and may incentivise them to get rid of staff in order to become eligible, which we do not want to encourage".
Despite this, officials agreed that on the whole, the policy was worthwhile as it would prevent many smaller firms from going under.
Finance Minister Grant Robertson said last week that the scheme "shares the burden with businesses when alert levels rise or in the event of a resurgence of Covid-19".
