The widely varying views over the merits or otherwise of the stimulus package put forward by the Rudd government shows just how uncertain the overall economic situation is. Economists giving evidence to the brief Senate inquiry have expressed differing views. Even after you take out the partisan talking points, the same variance of views is occurring in the USA while their stimulus package makes its way through Congress.
Even the interpretations given to current economic data seem to be all over the place. Some have suggested there is clear evidence the first, pre-Christmas stimulus package worked, while others say it was mostly wasted. Yesterday’s figures on ANZ’s count of newspaper and internet job advertisements was reported in one article as sliding “a further 6 per cent last month and down 34 per cent over the year”, but another piece, also in The Age said
‘The Government was encouraged yesterday by the ANZ’s observation that an increase in newspaper job advertising provided “some tentative evidence that the Government’s first fiscal stimulus package may be having a positive impact on the labour market in early 2009″.’
Given Treasury head Ken Henry has said that even after the event we might never know whether the stimulus package worked or not, I guess we’re all stuck with just ignoring the partisan cheerleaders and continuing to read articles and blogs by economists (apart from the economists who are partisan cheerleaders) to see if anything closer to a consensus emerges.
One consensus which does seem to be emerging is that the latest stimulus package does ignore the unemployed and the many who are likely to soon be in that position. Quite what to do about it with the current is another matter, given the very tight timeline, but at least it increases the chances that that group of people will be given more assistance in the federal Budget which will be brought down in a few months time.
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There cannot be any mystery with this now given that most of the world have or are implementing stimulus packages of their own in additional to sundry bailouts to keep their economies viable and from sinking further.
This issue of what should make up a Stimulus package has been widely discussed in the distant past and the present. This year’s Noble economist Paul Kruggman has been on the issue consistently given the painful process Obama has to go through with a Republican dominated Senate.
Economists are unanimous that packages are required. The mulitpliers for varioius types of Stimulus as calculated by Kruggman were for tax cuts about 0.7 and for infrastrucuture spending 3.0 and for cash payments, certainly well in advance of Tax cuts (which are a larger amount spread in small payments over a year).
Australia is different from most other countries in that we are not yet in the depths of a recession, though we are pretty close. This means our Stimulus package will need to be different. It is not purely a recovery package but a put the breaks on and hold your ground package.
The Cash component is a critically important part as it is this that will stop the many job losses that are now being contemplated by many a business, especially the retail and tourism sectors. Your Stimulus package can be much less if you are trying to stop jobs being lost rather than create jobs for those that were lost as in the USA. Thus it will be cheaper for Australia if the Govt is able to hold the economy as steady as possible.
The Liberal Party are well aware how important the Cash payments are in stopping imment job cuts and this is why they are trying to convert them to tax cuts or divert them to elsewhere.
With regard to Stimulus Packages generally a lot of economists have stated that it is much better to have far too much than not enough and that you should tripple any figure you calculate.
Given that we are talking about stopping human misery here, homelessness, mortgagee sales and all that stress, suffering and anxiety that goes with losing jobs and closing business we should be less concerned with deficits than looking after jobs. Deficits can be repaid and certainly Australia has the myriad resources to do so when the Global economy begins to recover. Another up side of doing everything possible to save jobs is that you can immediately profit from a up turn in the global economy.
I believe the Government is addressing the Unemployment issue seperately and what needs to be done there is easy up the process for claiming unemployement which at present is Dickensian and ultra mean. What you would expect from a decade of Howard.
Flielding wanted to divert $4bn from the package for the unemployed that are going to occur somehow not understanding taking money away from a program to protect jobs will increase the number of unemployed. I am sure that he lost them their jobs so they could recieve some extra unemployement benefits.
There will no doubt be a second package to deal with later problems the magnitude of which we wont know yet and it depends entirely upon the Global economy.
It is dissapointing that the passage of the Stimulus package is being held up to scrutiny be people who have shown themselves to be economic imbeciles and appear only interested in the politics of the thing and not the economics. Xenephon and Fielding are grandstanding whilst finding it hard to grasp even basic concepts. Thousands of people’s jobs are actually hanging on these two people.
I for one have full confidence in Henry and the Liberal Party used to for a decade when he was there Treasury man.