The 900 Dollar Answer


Kevin Rudd Photo: Bloomberg

Kevin Rudd Photo: Bloomberg

The big question on the media lips – has Kevin Rudd’s Stimulus Package been successful?


NSW Treasurer, Michael Costa, said the Rudd Stimulus, worth more than $50 million was a complete disaster  and has failed to create jobs. Costa said the Government had been confused and rushed into the decision in response to the economic crisis.

“The issue comes down to how many jobs did you save from that level of spending, and the cost-benefit of a stimulus becomes an issue,” he told Sky News on Monday. “It also means worthy projects that may well have positioned us for the recovery are not going to be there.

The Sydney Morning Herald reported on Costa’s announcement but did not appear to argue either side. However the article did report on Costa’s criticism against Rudd’s essay in the Monthly Magazine back in February. Rudd gives an analysis of the causes of the global financial crisis in the essay, and by linking Costa’s remarks on this with his criticism of the Stimulus package the SMH could be subtly making a criticism of their own.

I found an article in the Business Spectator quite interesting. The article argues that the increased Government involvement is having a negative affect on the economy and that the Governments “spending spree” is not a sufficient solution to our economic problems.

It is the supply side of the economy that matters most. And yet our current policies actually harm the productive capacity of our economy. The main consequences from current policies will be bigger government, less-efficient government, and more political risk. All of these things are a constraint on the supply-side of the economy.

The article gives evidence to this by reporting that the Commonwealth Government has increased it’s share in the economy from 22% to 28% and has added new layers of Government control. The article goes on to say that this affects our economy because the free market is more efficient than the bureaucracy.

The Heritage Foundation measures economic freedom (small government, free trade, private property, low regulation) and finds that it is correlated with prosperity, democracy, human development, and a clean environment. Countries classified as ‘free’ or ‘mostly free’ have a GDP/capita over $US30,000; while ‘moderately free’ countries have a GDP/capita of around $US15,000; and ‘unfree’ countries are around $US4,000 GDP/capita.

This is a very interesting take and does make one very valid point – economic growth comes from the private sector, not from the politicians and bureaucrats. So is the Stimulus package just another way the Government exerts it’s control on us? By throwing all this money into the economy other projects (such as construction and education) that require funding are likely to receive a lot less. Will this affect the efficiency of these projects?

Before the Stimulus Package went ahead The Age reported on the opposition towards the idea:

Nationals Senate leader Barnaby Joyce accused Prime Minister Kevin Rudd of applying a “pressure salesman trick” on the Australian people. “It’s not his money, it is the Australian people’s money, and there will be the due oversight that is expected of this,” he told reporters in Canberra.

While it has been nice to receive an extra $900 (I’ve actually received two), we cannot deny that it is in fact our own money! It’s good to see the media recognize this and not sensationalize the idea of a “free” payout.

The Australian has also reported on the failure of the Stimulus package saying that one of the reasons behind the payout was to increase Rudd’s popularity with the public in hope to be reelected next semester.

In recent weeks, as it has become clear that the impact of the fiscal stimulus was overstated, the Government has resorted to the feeble claim that things would have been worse without it. Its constant revision of its economic forecast makes it clear that whatever the impact of the fiscal stimulus, at the very least its structure was based on nothing more than guesswork.

The Australian also argues that the Australian public have seen right through the package and are critical of the Government vision as not one piece of national infrastructure has been produced. I tried to put my money back into the economy through retail and such, although there was no massive change in my expenditure and I know a lot of people who either saved the money, or being university students, spent it on alcohol!

So far all of these articles have critiqued the Stimulus package and haven’t looked the any positive arguments towards the issue. Although I do agree with their views I didn’t see any statistics on the unemployment rate and whether or not it has actually fallen, risen or remained stable. I did look at the March-April unemployment rate on a Government website and I could see that it has increased to 5.5% – one piece of evidence that the  Stimulus Package so far hasn’t been beneficial in that area. 

Published in: on May 11, 2009 at 6:39 am  Leave a Comment  

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