Cameras, lights, stimulus!

Andrew Pegler – 13 Aug 2010

The Libs say the stimulus package only played a small role in getting us over the line and it was a dog’s breakfast anyway. Labor points out that ours was the shortest and shallowest downturn in the industrialised world – end of argument. Whoever you support here’s your script for this weekend’s BBQ. (Sorry for not including the Greens.)

The Liberal voter’s script

Scene: BBQ with friends. Beer/wine in hand. Intelligent, authoritative look on face.

You: Yeah, I hear what you’re sayin’ but you can’t assume the stimulus spending spree kept us out of recession. I mean just look at the US. They spent heaps more and the place is still a basket case (see last week’s blog). So the way I see it, it wasn’t just the stimulus that saved our bacon, there are two other major factors. Firstly, by reducing rates to emergency lows the Reserve Bank made it cheaper and therefore easier for people to borrow money to invest in things and this created jobs and strengthened the economy against the GFC onslaught. Ultimately this bolstered our GDP (Gross Domestic Product) and that kept us out of recession because a recession is when you have two quarters in a row of negative GDP. The second thing was the depreciation of the Aussie dollar. At one stage AUD was hurtling towards parity i.e. one $AUD equals one $USD. Then suddenly it dropped to the low 0.80s making our exports cheaper, which meant a lot more money flowing into the economy. So as you can see the stimulus only played a co-starring role … and the rollout was a dog’s breakfast anyway. Oh and while I’m at it did anyone see that the Australian National Audit Office has cast serious doubt on Labor claims that the stimulus added 2.75 per cent to GDP in 2009-10?

Pause for applause at your brilliance.

You: I’m off to the fridge. Beer anyone?

The Labor voter’s script

Scene: BBQ with friends. Beer/wine in hand. Intelligent, authoritative look on face.

You: The crisis struck hard and fast and no one knew how deep it would go or how long it would last. So with the whole financial system on the verge of collapse we needed decisive action or it was curtains.

Pause for general mutterings of agreement.

You: In that context the fastest and most effective way to combat the GFC was a big money injection like the stimulus package. Plus the pink bats rollout helped to reduce our national carbon footprint and building the education revolution benefited the Aussies of tomorrow. With that in mind I tend to agree with former World Bank chief economist and Nobel Prize winner Joseph Stiglitz, who recently said the Australian stimulus package was one of the best designed in the world.

Then there’s the issue of waste, which if you’re going to spend that much money that quickly, is inevitable. The question is what would have happed if we hadn’t spent it? Just try to estimate what waste it would represent to the economy and to the nation if 200,000 people had lost their jobs. Then there’s a gap between what the economy could have lost in terms of taxes with high unemployment and with big machines and factories sitting around collecting dust. In other words, as Joseph Stiglitz also pointed out, our choice was one form of waste versus another. And I reckon the government choice of waste was the right one.

Pause for applause at your brilliance.

You: I’m off to the fridge. Beer anyone?