In the wake of bank insolvencies overseas and bailouts by other governments, the Prime Minister announced a $10.4b stimulus package to stabilise and protect the Australian economy. A breakdown of the stimulus plan can be accessed here (via The Age, 14/10/08) and here (via The Australian, 14/10/08).
There are now concerns (The Australian, 15/10/08) that the plan will turn the sizeable budgetary surplus into a deficit. It has been reported (The Australian, 22/10/08) that the government is backing down from its initial promise to guarantee all bank deposits to avoid market distortions.
How do you rate the financial plan? What would you do?
Terry McCrann gives Rudd a hiding in the Herald Sun (29/10/08) over his remedial action.
Kevin Rudd has announced a massive stimulus package.
Is it a mistake as Steven Kirchner argues?
Or is it a necessary measure as Peter Hartcher believes?
Tony Abbott got it right when he said “It’s instructive to compare the Rudd Labor Government’s response to a looming recession with the Hawke government’s response to an actual one. Hawke floated the dollar, cut tariffs, and de-regulated financial markets. The need to respond to a crisis prompted good policy. For a time, Bob Hawke and Paul Keating even managed to suppress their party’s anti-market instincts and, in doing so, helped to create the foundations for the prosperity of the past decade. By contrast, this new Labor Government is using the need to respond to a recession to indulge old-fashioned big government prejudice.”
All Rudd is doing in response to this recession is splurging our money like there’s no tomorrow.
Well, Rudd is not spending for the sake of spending. He’s spending to protect jobs. That’s why we had a surplus - so we can use it on a rainy day. This is a rainy day.
If this spending saves jobs then it’s worthwhile.
Stevie, may i ask why you believe the Prime Minister of Australia would spend only for the sake of spending?
Do you honestly think Kevin Rudd has no reason for his stimulus package other than a personal whim to spend for the sake of it?
did i say that Kevin spends only for the sake of spending??
did i say that he had no reason but his personal whim?
i just think that he is going to spend too much money and incur too much debt (which we will have to repay later through higher taxes) for too little. why not save some for later? this recession might last several years, we are told. He doesn’t even know how effective all this spending will be which is why he’s so wary of making specific promises.
Guys,
That statement is too black and white, and really shows a very superficial understanding of what is going on here. It’s not a matter of spending to stimulate the economy, it’s a matter of using a crisis to do things he otherwise wouldn’t be able to do politically. Point in case. $900 hand outs are a vote buying excercise. The multiplier (google multiplier and economics if you don’t understand) of these handouts is extremely low. Basically we generate very little activity for our buck compared with other methods. Now it costs billions of dollars to do this. That same money, for example, could be spent on the health system, something I think nobody could deny needs more money. And in a single swoop you’d just about solve the bed shortage in australia in one go. You would also generate far far far more Australian jobs because a huge component of that money is spent on services, which are basically Australian jobs in their own right, plus further locally produced building industry supplies and as well as locally produced medical supplies. And almost right around the country it would be dispused as all areas are in need of health.
To compare, most of the money from handouts are either saved, used to pay down existing debt (both which generate zero jobs) or go to Korea to buy LG plasma tv products.
So why do it this way then? Well the gov claims because it’s fast… but any fool can see there are other ‘fast spends’ that generate more local economic activity. This is a giant vote buying excercise, and the government wouldn’t get that same result from hospitals. Something people generally only see when they’re sick or somebody near them is.
Luke (B Econ Hons 1st class)
I totally agree Luke.
But are the Liberals genuinely proposing anything better?
Surprisingly, the New York Times editorialises (23/3/09) against Obama’s bank plan:
“In other banking crises, both in this country and abroad, resolution of a systemwide problem has sooner or later involved separating solvent banks from insolvent banks. In the end, there is no getting around firing the executives at failing banks, acknowledging the losses, wiping out the shareholders and then deciding how the government can best restructure the institutions.”
Full editorial here.
Nobel Prize laureate in economics and Obama supporter Joseph E Stiglitz in the New York Times (31/3/09):
“THE Obama administration’s $500 billion or more proposal to deal with America’s ailing banks has been described by some in the financial markets as a win-win-win proposal. Actually, it is a win-win-lose proposal: the banks win, investors win — and taxpayers lose…the Geithner plan works only if and when the taxpayer loses big time…What the Obama administration is doing is far worse than nationalization: it is ersatz capitalism, the privatizing of gains and the socializing of losses. It is a “partnership” in which one partner robs the other…”
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How did Cameroon loose so quickly. Could that have been quicker. I expected that they had a solid opportunity to do well in this years world cup. Maybe it was just bad luck. Maybe its time to jump on the Argentina bandwagon. Looks like Demichelis has already scored. Go Argentina. To make me feel better from that devistating loss by Cameroon, I have been listening to some funny jokes.. This joke is really funny: http://www.youtube.com/watch?v=N3j7uSbccSc
