That data holds no surprises, and I believe indicates where everything is at. Even if the worst wasn't going to happen, people have been 'frightened' into believing that this is going to be a long and tough recession/depression. Because of this, it is a natural reaction to hold onto any extra funds, in preparation for the worst to happen e.g. losing a job. Therefore, no matter how much money is 'thrown' at the economy, the same outcome is going to happen. We are in for some tough times!! Rudd and Swan say unemployment will hit 7% - some economists are predicting as high as 11%. Giving money to people may have been worked in Nov/Dec, but it was only given to select 'groups'. If it was given to everyone, a depression may have been avoided, but now that community sentiment has changed in these past 2 months, the Government shouldn't be wasting taxpayer dollars. Even though I appear to be benefitting from the handouts, I too, am going to do what most people are going to and that is to "Save".
2
Saturday, 07 February 2009 06:40
Andrew Laming
With a recession pending, the stimulus package must do just that: stimulate the economy and avert a recession.
Mr Rudd’s package fails both tests.
Of the December $10.4 billion stimulus, only 5-10% made it into retail sales. In tough times, rational behaviour means many use it to pay down loans or keep it for a ‘rainy day.â€
Nation-building is vital, but in a recession it is economic (not social) infrastructure which reduces the costs for business, which keep people employed, avoids welfare blowouts and make recessions shorter and shallower.
The Wall St Journal described Mr Rudds package as, “millions into ‘town halls, community centres…. so all the newly unemployed can meet and reminisce about the times when they used to have jobs.â€
Around 11 million Australians miss out on this bonus, including the unemployed who we desperately need to reengage in the workforce. A $950 payment now is little help for the thousands expected to lose their job in the coming months.
The last of Australia’s surplus was distributed back in December. So these new bonus payments are funded by lending money from overseas sources. So its no bonanza. Like all loans, this potential $200 billion debt must be paid back by workers, students and future generations. Long after the bonuses are gone, every Australian will be left to service the interest; potentially $9,500 debt per person (ten times the bonus).
There is a better way. In the end, it is falling interest rates (especially in Australia where they are comparatively high) which will restore the confidence, entrepreneurialism and ‘have a go’ spirit for which Australians are renowned. That will happen. We know cash splashes are easy and seductive, but in our heart of hearts, we know they achieve little bang for the buck and accrue a massive debt for the next generation.
I support a stimulus package, but not Mr Rudd’s, which is too large, poorly targeted, ill-thought through and irresponsible in today’s economic climate.
3
Sunday, 08 February 2009 15:32
Andrew Laming
This is not a debate between a small Coalition and a large Government stimulus package. It is not about supporting a larger intervention if you are bearish about Australia and smaller if you are optimistic.
This debate is about whether $42 billion spend AS PROPOSED is appropriate in quality and quantity.
Once committed, the $42 billion becomes opportunity cost. That's why Mr Turnbulls's proposed scrutiny of the package in the Senate is so vital.
This debate is not about whether the world will recover from the recession. Of course it will. The real argument is whether the stimuli, as proposed represent cost-effective recession aversion.
Highest level analysis asks - how and when is each stimulus dollar of GDP deployed to pre-empt economic threats and have maximum impact maintaining jobs, and in turn, Australia's GDP growth.
Judge the package not on the social infrastructure it delivers or that people are "paying down home loans and that is no bad thing." This is akin to treating a skin cancer patient with a weight loss program.
We all want nation-building, but in a recession, a specific set of measures are prescribed to maintain economic activity (reduce the length and depth of recession), and to position the economy to achieve the most sustainable growth recovery (so that we are better placed than our competitor economies when we all enter the post-recession phase.
Readers will know of those elements: PREVENTION: high-multiplier expenditure, targeting the most vulnerable domestic sectors to job losses, and ADAPTION: where losses occur, reducing frictional unemployment through rapid retraining and redeployment into economic infrastructure - which reduces costs to business, builds confidence and prevents further job losses.
Finally, with the current fiscal fixation, don’t underestimate the ultimate power of monetary policy. Australia's comparatively higher interest rates allow significant room for stimulus which is not available to other economies, which will restore confidence and entrepreneurialism without sending Australia into generational debt.
As an aside...
Regarding the ABS sales figures for December: It is irrelevant that December was $700 million more than November. To understand the stimulus, four factors enter the calculations;
1. Temporal factors. Treasury now says they only expected 10% of the stimulus to enter the economy in December (they didnt say that back in December). Most (they hope will turn up in Q1 and Q2 this year).
2.Annual cycles: because every year, Australians spend remarkably close to 11.1% of their annual retail spend in December (as they did in 08, despite stimulus),
3. Year by year comparison: the degree to which December 08 increased from the 4 Decembers before it, relative to the annual growths in each of those years.
4. Monthly trends: because even with all the pessimism post-Lehmans, it shows that retail sales held up July-November. Too many people grasp at November's slip and infer trends. Remember the stimulus came before we even had the ABS November 08 figures.
My case that Dec 2008 WAS ALWAYS GOING TO BE SOLID. That position is supported by all four points above, together with the confidence of falling interest rates, particularly cheap fuel and the Christmas effect (where people spend irrationally at Christmas (even at tough times), then compensate, with a rational slump in the first three months of the following year(see Xmas 2007).
It is difficult to argue that the December stimulus saved/supported/created any jobs, because department stores and the household sector (big winners from the stimulus), can and did further discount to maintain sales volumes and retain staff.
In the end, massive discounting plus the stimulus - achieved sales volumes of $300 - 850 million above expectation.
I argue that such a result neither justifies the stimulus, nor assisted much in averting what lies ahead for Australia in 2009.
Andrew Laming
4
Tuesday, 10 February 2009 18:37
Bob Buick
I am no academic, nor a leader in industry or commerce, but consider that I am a free thinking over the horizon visionary and do not agree with tax cuts for political purposes, nor grants, but in advocate upgrading and developing infrastructure. There are a number of serious problems confronting this nation and will discuss two that are vital for future development, these are land and sea transport and water transfer from the northern regions to the mid and southern regions. For commerce and defence road and rail lines of communications are vital, the infrastructures of these facilities are a disgrace and we need a complete new plan for the year twenty-fifty. Major port facilities to import and export commodities that will not restrict trade as witnessed in past decade. Water transfer from the north to the south applicable to WA and Qld, the overflow of the Ord and Burdekin Rivers annually without transferring this overflow to the south is crimes that all governments since the 1970 need to be judged on. Bradfield in the 1930s produced a plan to use overflows from the Burdekin to the headwaters of the Darling River while in the past decade there has been talk of transferring The Ord overflow to the SW of that state, diversion could feed the Goldfields and Esperance Regions. I consider that democracy in Australia has been bastardised deliberately by the three major political parties for their own selfish agenda that consideration for the nation has never been their agenda during the last fifty-years. There must be bipartisan planning on projects of national importance and these, once signed-off must proceed with reviews every five years. To pay for these projects taxation must be set at an agreed level and not be lowered or used as a political tool to ingratiated any party, surplus monies be directed to complete projects or expand projects identified in the five-yearly reviews.
5
Tuesday, 10 February 2009 19:26
Fearless Freddy
The latest Newspoll would suggest that the majority of Australians are backing Rudd's stimulus package over Turnbull's half-arsed attempt, which is really a continuation of Howard's upward redistribution of wealth. This is the conservative panacea for boom times and recession.
6
Tuesday, 10 February 2009 20:33
Doug Hynd
propostion of the sample who did not recieve cash payment in the first stimulus package suggests that this is a vry biased sample. answers may reflect the stage of life and economic status of those answring the questionnaire. Answers on the other topic on credit cards would tend to support this view.
7
Tuesday, 10 February 2009 20:59
Graham Young
Doug, the sample isn't representative - it's an extremely large focus group. Do you know what percentage of people received the economic stimulus payment last year?
8
Tuesday, 10 February 2009 21:14
swamprat
why is a liberal politician Andrew Laming posting on these sites, i really dont think anythig he writes would be anything but the liberal propaganda and we get enough of that anyway.
9
Tuesday, 10 February 2009 21:14
swamprat
why is a liberal politician Andrew Laming posting on these sites, i really dont think anythig he writes would be anything but the liberal propaganda and we get enough of that anyway.
10
Tuesday, 10 February 2009 21:18
John
Buzz off Mr Laming
11
Tuesday, 10 February 2009 21:29
Philip Machanick
This $42-billion package is a huge lost opportunity. To counter the Libs' spin here, check out my Green perspective, which I will not repeat here at length since it's on my web site.
The bottom line: counter-cycle Keynesian spending is not likely to be inflationary. Given the need to re-gear the economy to more expensive fossil fuels and more renewables and energy efficiency, we should be spending big on renewables (which would also be big job creators) while the economy needs stimulus, and big government spending is fiscally responsible.
12
Tuesday, 10 February 2009 21:44
Graham Young
I think it's great that politicians want to post here. Would like to see others. I sent the results of this last survey out to every federal MHR and Senator, which is probably why Andrew Laming is posting.
13
Wednesday, 11 February 2009 09:23
Jonathan
Philip Machanick, you can't go waste billions of other people's tax dollars on your pet projects. That is called a command economy and it never worked in the communist bloc.
If green energy and green projects were all so efficient, then the free market would allocate resources towards them. Just because people don't choose to live according to your preferences, it doesn't mean you should force them.
And secondly, any Keynesian policies are deeply inflationary. Any expansion of public debt and expansion of the supply of money will set of an inflationary spiral that will be hard to stop once all the central banks of the world get in on the act and race to de-value their currencies.
14
Wednesday, 11 February 2009 11:57
ggg
I suggest Andrew Laming put his head where most of his current Liberal colleagues have theirs, as then we don't need to read or hear him! His forum is the floor of Parliament, not here.
15
Wednesday, 11 February 2009 13:28
Old Trout
Surprise, surprise $42 billion down the drain. Sure a lot will be saved for a rainy day when the high personal taxes and increased GST returns to pay off the largesse get too much for us.
16
Wednesday, 11 February 2009 18:09
Michael Smith
I agree why is Andrew Laming allowed to post to this site we don't need his one sided opinion on this very important package to make up our minds.Mr Howard should have put in place a lot of infrastructure when Australia was in good times. Bit failed to do so.Stop talking Mr Laming you had your chance.
17
Wednesday, 11 February 2009 19:31
Laurie
Some interesting responses as usual..particularly those directed towards Andrew Laming. I don't know the man.. and don't particularly want to know him. BUT..
The responses to his posting from some other readers is pathetic.. A typical Leftie idea of a balanced discussion being one in which you get rid of any views that disagree with your views...
Mr Rudd’s package fails both tests.
Of the December $10.4 billion stimulus, only 5-10% made it into retail sales. In tough times, rational behaviour means many use it to pay down loans or keep it for a ‘rainy day.â€
Nation-building is vital, but in a recession it is economic (not social) infrastructure which reduces the costs for business, which keep people employed, avoids welfare blowouts and make recessions shorter and shallower.
The Wall St Journal described Mr Rudds package as, “millions into ‘town halls, community centres…. so all the newly unemployed can meet and reminisce about the times when they used to have jobs.â€
Around 11 million Australians miss out on this bonus, including the unemployed who we desperately need to reengage in the workforce. A $950 payment now is little help for the thousands expected to lose their job in the coming months.
The last of Australia’s surplus was distributed back in December. So these new bonus payments are funded by lending money from overseas sources. So its no bonanza. Like all loans, this potential $200 billion debt must be paid back by workers, students and future generations. Long after the bonuses are gone, every Australian will be left to service the interest; potentially $9,500 debt per person (ten times the bonus).
There is a better way. In the end, it is falling interest rates (especially in Australia where they are comparatively high) which will restore the confidence, entrepreneurialism and ‘have a go’ spirit for which Australians are renowned. That will happen. We know cash splashes are easy and seductive, but in our heart of hearts, we know they achieve little bang for the buck and accrue a massive debt for the next generation.
I support a stimulus package, but not Mr Rudd’s, which is too large, poorly targeted, ill-thought through and irresponsible in today’s economic climate.
This debate is about whether $42 billion spend AS PROPOSED is appropriate in quality and quantity.
Once committed, the $42 billion becomes opportunity cost. That's why Mr Turnbulls's proposed scrutiny of the package in the Senate is so vital.
This debate is not about whether the world will recover from the recession. Of course it will. The real argument is whether the stimuli, as proposed represent cost-effective recession aversion.
Highest level analysis asks - how and when is each stimulus dollar of GDP deployed to pre-empt economic threats and have maximum impact maintaining jobs, and in turn, Australia's GDP growth.
Judge the package not on the social infrastructure it delivers or that people are "paying down home loans and that is no bad thing." This is akin to treating a skin cancer patient with a weight loss program.
We all want nation-building, but in a recession, a specific set of measures are prescribed to maintain economic activity (reduce the length and depth of recession), and to position the economy to achieve the most sustainable growth recovery (so that we are better placed than our competitor economies when we all enter the post-recession phase.
Readers will know of those elements: PREVENTION: high-multiplier expenditure, targeting the most vulnerable domestic sectors to job losses, and ADAPTION: where losses occur, reducing frictional unemployment through rapid retraining and redeployment into economic infrastructure - which reduces costs to business, builds confidence and prevents further job losses.
Finally, with the current fiscal fixation, don’t underestimate the ultimate power of monetary policy. Australia's comparatively higher interest rates allow significant room for stimulus which is not available to other economies, which will restore confidence and entrepreneurialism without sending Australia into generational debt.
As an aside...
Regarding the ABS sales figures for December: It is irrelevant that December was $700 million more than November. To understand the stimulus, four factors enter the calculations;
1. Temporal factors. Treasury now says they only expected 10% of the stimulus to enter the economy in December (they didnt say that back in December). Most (they hope will turn up in Q1 and Q2 this year).
2.Annual cycles: because every year, Australians spend remarkably close to 11.1% of their annual retail spend in December (as they did in 08, despite stimulus),
3. Year by year comparison: the degree to which December 08 increased from the 4 Decembers before it, relative to the annual growths in each of those years.
4. Monthly trends: because even with all the pessimism post-Lehmans, it shows that retail sales held up July-November. Too many people grasp at November's slip and infer trends. Remember the stimulus came before we even had the ABS November 08 figures.
My case that Dec 2008 WAS ALWAYS GOING TO BE SOLID. That position is supported by all four points above, together with the confidence of falling interest rates, particularly cheap fuel and the Christmas effect (where people spend irrationally at Christmas (even at tough times), then compensate, with a rational slump in the first three months of the following year(see Xmas 2007).
It is difficult to argue that the December stimulus saved/supported/created any jobs, because department stores and the household sector (big winners from the stimulus), can and did further discount to maintain sales volumes and retain staff.
In the end, massive discounting plus the stimulus - achieved sales volumes of $300 - 850 million above expectation.
I argue that such a result neither justifies the stimulus, nor assisted much in averting what lies ahead for Australia in 2009.
Andrew Laming
There are a number of serious problems confronting this nation and will discuss two that are vital for future development, these are land and sea transport and water transfer from the northern regions to the mid and southern regions.
For commerce and defence road and rail lines of communications are vital, the infrastructures of these facilities are a disgrace and we need a complete new plan for the year twenty-fifty. Major port facilities to import and export commodities that will not restrict trade as witnessed in past decade.
Water transfer from the north to the south applicable to WA and Qld, the overflow of the Ord and Burdekin Rivers annually without transferring this overflow to the south is crimes that all governments since the 1970 need to be judged on. Bradfield in the 1930s produced a plan to use overflows from the Burdekin to the headwaters of the Darling River while in the past decade there has been talk of transferring The Ord overflow to the SW of that state, diversion could feed the Goldfields and Esperance Regions.
I consider that democracy in Australia has been bastardised deliberately by the three major political parties for their own selfish agenda that consideration for the nation has never been their agenda during the last fifty-years. There must be bipartisan planning on projects of national importance and these, once signed-off must proceed with reviews every five years. To pay for these projects taxation must be set at an agreed level and not be lowered or used as a political tool to ingratiated any party, surplus monies be directed to complete projects or expand projects identified in the five-yearly reviews.
The bottom line: counter-cycle Keynesian spending is not likely to be inflationary. Given the need to re-gear the economy to more expensive fossil fuels and more renewables and energy efficiency, we should be spending big on renewables (which would also be big job creators) while the economy needs stimulus, and big government spending is fiscally responsible.
If green energy and green projects were all so efficient, then the free market would allocate resources towards them. Just because people don't choose to live according to your preferences, it doesn't mean you should force them.
And secondly, any Keynesian policies are deeply inflationary. Any expansion of public debt and expansion of the supply of money will set of an inflationary spiral that will be hard to stop once all the central banks of the world get in on the act and race to de-value their currencies.
The responses to his posting from some other readers is pathetic.. A typical Leftie idea of a balanced discussion being one in which you get rid of any views that disagree with your views...
Pathetic