The Australian politics thread

[Moses]

what a crock, this package isn't stimulating me at all. I want a new plasma too..

[James]

How is this 42 billion going to be paid back?

Perhaps this won't happen, but I'm presuming in a couple of years or so when things settle down, the government will increase taxes across the board to pay it back. Not something we obviously want.

[Redbacks]

If we are bringing some major 'nation building' infrastructure projects forward then maybe these were budgeted in by Labour (Labor) and we will gather the savings as the years move on and hopefully the financial situation settles down?

Hopefully with a proper focus on the 'lessons learnt/technological innovation and research' side of the renewables and rail projects this can provide Australian companies with potential work in the Asian region.

[Son Of Coco]

Originally Posted by James

How is this 42 billion going to be paid back?

Perhaps this won't happen, but I'm presuming in a couple of years or so when things settle down, the government will increase taxes across the board to pay it back. Not something we obviously want.

I'm not sure, but as was mentioned last night on the 7:30 report (and I'm not sure how reliable it is), certain major economic figures have encouraged governments to spend too much stimulating the economy rather than not enough, and to not delay...it was certainly something that, when put to Malcolm Turnbull, he couldn't really answer in a satisfactory manner and instead resorted to 'Yeah but...what Mr Rudd is doing is just wrong'.

It seems that it's generally agreed the financial downturn could be a disaster for a number of countries worldwide...as I said before I'm not an economist, what other options do we have that would stimulate the economy to the degree necessary?

[Burgey]

Originally Posted by James

How is this 42 billion going to be paid back?

Perhaps this won't happen, but I'm presuming in a couple of years or so when things settle down, the government will increase taxes across the board to pay it back. Not something we obviously want.

But if they don't stimulate the economy, the fear is the downturn will be deeper and longer than it could have been.

Originally Posted by Redbacks

If we are bringing some major 'nation building' infrastructure projects forward then maybe these were budgeted in by Labour (Labor) and we will gather the savings as the years move on and hopefully the financial situation settles down?

Hopefully with a proper focus on the 'lessons learnt/technological innovation and research' side of the renewables and rail projects this can provide Australian companies with potential work in the Asian region.

Apparently there are such projects in the pipeline, but they're part odf some separate program. The idea here is to get a whle heap of smaller projects going asap so thee's activity in the economy. That way, even if there's only certain tradies doing the jobs from the governmnet, the idea (I think) is others will pick up the provate sector work those tradies would have been doing otherwise.

Originally Posted by Son Of Coco

I'm not sure, but as was mentioned last night on the 7:30 report (and I'm not sure how reliable it is), certain major economic figures have encouraged governments to spend too much stimulating the economy rather than not enough, and to not delay...it was certainly something that, when put to Malcolm Turnbull, he couldn't really answer in a satisfactory manner and instead resorted to 'Yeah but...what Mr Rudd is doing is just wrong'.

It seems that it's generally agreed the financial downturn could be a disaster for a number of countries worldwide...as I said before I'm not an economist, what other options do we have that would stimulate the economy to the degree necessary?

The bloke who said that was apparently the chief economist at the IMF.

[howardj]

Nobody's saying do nothing. It's just the stimulatory bang you're going to get for your buck that is where the debate is. Arguably a smaller, better targetted package would be just as effective. As I say, the real disaster in a recession is unemployment. That is what should be the absolute focus. I think though what Rudd is trying to do, as would most politicians, is trying to massage the quarterly national accounts and ensure that they don't show two consecutive quarters of negative growth (a technical recession) - hence the indiscrimate handouts.

[Redbacks]

Rudd would be looking at the multiplier effect, if we spend our $950 we will create jobs as a result, and via GST give money indirectly to the states.

This is a good example from wiki

For example: a company spends $1 million to build a factory. The money does not disappear, but rather becomes wages to builders, revenue to suppliers etc. The builders will have higher disposable income as a result, so consumption, hence aggregate demand will rise as well. Suppose further all of the recipients of new factory spending in turn spend it. Thus by adding the times money changed hands in this example the multiplier is 2. One person's expense is another's income.

[vic_orthdox]

Originally Posted by James

How is this 42 billion going to be paid back?

Perhaps this won't happen, but I'm presuming in a couple of years or so when things settle down, the government will increase taxes across the board to pay it back. Not something we obviously want.

The $42 billion comes back when we enter another growth period and wages increase (hence increased inicome tax collections) and profit increases (hence increased business tax collections).

[PhoenixFire]

And then after the growth, what happens when you (or we) hit another slump/recession?

[JBH001]

Never liked Rudd all that much, thought he was, and is, too much of a technocrat.

But this stimulus package is something Australia can afford to do, especially if spent in the right way and in the right areas. Some pretty sensible work from Keating through to Costello and boom times since the 91/92 recession means that the government accounts are in better shape than all other western governments. IIRC the only issue is in Australia's private debt ratios to GDP which are pretty high, although not close to New Zealand's.

We owe 90% of our GDP and we have been able to secure this level of credit flow due to the huge amounts of cerdit sloshing around, and also because our government accounts under the later National government of the 1990s and the Labour governments of the 2000s have generally been pretty good. This is not going to be the case for the foreseeable future. IIRC our public spending is due to rocket up to close to 40% of GDP from its current position at around 20% and will likely stay there in the foreseeable future. New Zealand's dependance on credit to pay for our living expenses is one reason why Bollard (head of the RBNZ), Whitehead (CEO of the Treasury), and English (Finance Minister) have been doing the rounds of financial capitals - pretty much begging that the credit flows not dry up too fast and that S and P maintain its AAA rating of our credit worthiness. Even so, our public accounts are likely to be better than most other western nations whose debt is going to go over the 50% mark and then some (the UK for instance, is toast, it really is only a matter of time for them, imo).

That said, I do hope that Rudd and the Australian public dont think this stimulus package a way out of the onset of depression. There simply is not enough money to do that - it would be like farting into a storm. What it is going to do, I think, is make the inevitable adjustment softer and easier to bear in terms of both spending and employment figures. Frankly it is a good move as long as it is not made out to be more than what it is - a way to cushion a hard landing and negotiate a difficult period of adjustment. But to re-iterate the point, in no way will it avert the looming bad economic times for Australia.

[Burgey]

Originally Posted by howardj

Nobody's saying do nothing. It's just the stimulatory bang you're going to get for your buck that is where the debate is. Arguably a smaller, better targetted package would be just as effective. As I say, the real disaster in a recession is unemployment. That is what should be the absolute focus. I think though what Rudd is trying to do, as would most politicians, is trying to massage the quarterly national accounts and ensure that they don't show two consecutive quarters of negative growth (a technical recession) - hence the indiscrimate handouts.

Absolutely - it's always about the politics, no matter who's in power.

[Son Of Coco]

Originally Posted by howardj

Nobody's saying do nothing. It's just the stimulatory bang you're going to get for your buck that is where the debate is. Arguably a smaller, better targetted package would be just as effective. As I say, the real disaster in a recession is unemployment. That is what should be the absolute focus. I think though what Rudd is trying to do, as would most politicians, is trying to massage the quarterly national accounts and ensure that they don't show two consecutive quarters of negative growth (a technical recession) - hence the indiscrimate handouts.

I miss a lot of this being overseas, but what are Mr Turnbull's alternative ideas to doing this then? He didn't seem to have any the other night on the 7:30 report...but I'm sure something has been put forward as an alternative.

[howardj]

He wants the infrastructure money all redirected to Point Piper schools - expanding the polo fields etc.

[Burgey]

Originally Posted by howardj

He wants the infrastructure money all redirected to Point Piper schools - expanding the polo fields etc.

Wants to go back to the old JH education grants - $800K to the wealthiest private schools, $5000 to each public HS. Seriously, what's the problem? More whinging by inadequate public school teachers for mine

[vic_orthdox]

Originally Posted by PhoenixFire

And then after the growth, what happens when you (or we) hit another slump/recession?

That's the nature of the economic cycle though. Governments generate themselves surpluses during the good economic times, and use it to fund the extra spending required to stimulate the economy during the next contraction of the economy.