While the government isn’t committing to anything, there’s speculation that another “stimulus package” is in the works. If so, how should that stimulus be delivered?
Malcolm Turnbull – in the context of another incoherent ramble on the economy – wants tax cuts. However, from what I’ve read, there’s a fair bit of evidence to suggest tax cuts are not the best option for economic stimulus. A similar debate is playing out in the American context – see this post; the guts of the story seems to be that “countercyclical” tax cuts don’t provide as much of a “multiplier effect” as government spending, as a lot of people just save the money when they’re feeling uncertain about their job. There’s also infrastructure spending, which is in vogue everywhere, including Japan, but there’s limits to how much can be efficiently spent on infrastructure in a hurry. And then, of course, there’s welfare spending, which the government sprinkled on politically convenient groups last time around.
If there is to be more dollops of cash ladeled around, I’d hope that some of the welfare might go towards the unemployed and possibly students, two groups who do it hard, will spend the money they receive, and haven’t got a cent of extra money so far. But there must be other forms of government spending that could help provide an economic stimulus and would offer long-term benefits. Environmental incentives are one that’s been widely proposed. But there are plenty of other possibilities. In my own area, one that comes to mind is an increase in postgraduate scholarships and ARC grant funding (obviously, I have a direct interest in such). The machinery to hand out the money already exists. An increase in unemployment means that postgraduate study and research become more attractive options than they might otherwise have been, meaning that there should be more suitable and interested candidates than in the past. And investments in education have a pretty decent long-term return.
So what other options are there out there?
What was wrong with the last package? Seemed to work fine from where I was standing.
What’s wrong with a GST cut?
As we were told at the time, GST is a regressive tax so it would be more directed at people on lower incomes.
You *can’t* save it, if spending is what we’re trying to achieve then don’t tax spending as much.
One of the most damning of the Howard Government’s economic incompetencies was the failure to appreciate that economies and markets are cyclical and that bad times inevitably follow good.
Therefore in the good times, you plan and provide for the bad.
In this case, the Howard Government could have and should have had a number of infrastructure projects in the pipeline, economically analysed and prioritised, designed, planned, all approvals obtained and detailed tender documents printed up and ready to roll.
Not hard to do, not expensive (in fact &%$$^## cheaper if properly economically analysed and prioritised), and when the economy needs an injection of Government spending, ready for immediate commmencement.
Marks – these seem rather unusual infrastructure projects you have described. Apparently all worth doing but not so much that you immediately schedule them to start but rather “save them up” for a rainy day. Sounds potentially very wasteful.
Stephen altering the GST rate would be an Admin nightmare. It may well stimulate spending to some degree but you’d have to scehdule probably for 1 july start you’d also have to get the States to sign off. Is thecut temporary or permanent? If permanent what happens to the income tax cuts that came with GST introduction?
If someone could devise some instrument that provided powerful incentives to NOT lay off employees that might become unprofitable through the temporary downturn period only would be the ultimate pump prime if you approve of pump priming. The key issue is to make people feel their job is safe. For most Aussies their spending power via much lower petrol prices and interest rates has improved dramatically they “just” need to feel safe enough to use it.
Judging what employees are only temporarily unprofitable should be left to the businesses but could be open to serious abuse by businesses who remain solidly profitable
I don’t know the figures but I wonder what it would cost the Feds to reimburse States or employers payroll tax bills for 12 months? Could be too expensive and would apply to all employees of large employers not just the ones likely to be retrenched. If someone could come up with something more targeted it would be right on the money in my view.
A GST cut is bad stimulus, the UK is doing a similar thing with a small VAT cut, but its a very expensive way to drive up demand, and it cuts money from the States who face huge blowouts in health funding for one.
Infrastructure is good stimulus, but as Nate Silver and Obama have pointed out there are only so many projects.
ARC funding would help the 23 people who want to do phDs, it probably isn’t a priority.
Also any tax changes would pre-empt Henry and put the cart before the horse.
It would seem that any new package would probably include more infrastructure spending, business tax cuts, aimed mainly at small business, and hopefully some green energy based initiatives, encouraging take-up and expanding supply of renewable energy.
Jabberwock: I wasn’t claiming it was a massive stimulus, but it was a for-instance.
And postgraduate education is a lot more than just the odd PhD.
“And postgraduate education is a lot more than just the odd PhD.”
No, but there are already far far more PhD students out there than there are academic jobs. I haven’t seen ANY funding proposals for universities that feature money for more teachers and researchers. Lots of cash for more buildings though.
Not wanting to be a party pooper, but if the Austrian analysis is right, the only cure for recessions is to let them run their course. Treat the fever with a bit of welfare for people who lose their jobs but otherwise step aside. The longer you put off the cure, the more drastic it gets.
But the last fella who spoke about there being recessions with some degree of necessity is having trouble living down the remarks as I recall.
Universities could offer postgraduate scholorships in bricklaying perhaps?
Abolishing payroll tax would be a great stimulus initiative and would be a clear marker of a long overdue reform. Politically, it would be very smart for Rudd, as it would go right to the synapses of small business, who are far from sold on more $ to pensioners, the unemployed and students, or infrastructure projects with varying degrees of urgency and need.
The catch, of course, is that it is state governments who collect payroll tax, and their financial houses are in poor shape, having in many cases taken their eyes off the fiscal ball during the boom years.
Its worth keeping in mind that the most effective stimulus to the economy remains interest rate cuts. Each 1% fall in interest rates puts $10 billion back into the economy, as much as the first fiscal stimulus package.
I’d love more $ to go into ARC grants in the name of ‘fiscal stimulus’, but that’s my self-interest coming out there.
My concern is that the urge for a short-term solution – like the $ doled out to local governments last year to repaint the fences at their sports ovals – will push other important medium-term issues off the agenda, like the question of paid maternity leave or affordable quality child care.
I believe that postgraduate studies in the hegemonic supraidentical praxis of late neo-post-modernist industrial Kleinenderschaftentaxen (aka basket-weaving) is the accepted channel for public funds.
Nick, there’s the funding for the mid-career research fellowships – which is quite substantial and already on the table – and the Bradley Report specifically calls for a significant increase in funding for teaching, and thus for teaching positions. And also full cost ARC grants, which would have implications for both research and teaching jobs.
Mark, that’s good to hear — though I am feeling a bit of post-Garnaut-report-government-backdown burnout. Are we likely to see funding flowing on following the Report’s recommendations this year?
I guess that depends on the timing of both the government’s response and how they respond, Nick.
@Robert
Fair enough, I was being flippant.
More teaching / research funding would be nice, my more serious point is that it won’t have much, if any, of a stimulatory effect on the economy. Which probably means it goes in the category of things that are nice, rather than things that are necessary. Unfortunately of course.
Increased R&D funding might be an option, though I think it would be targeted, at the least towards quick start, economically significant projects.
Jacques @ 8, I agree that the longer you put off the hard times the worse they are going to be. The IMF tells countries in deepening trouble to suck it up and make the hard choices, and Australia etc nod their heads in agreement. The boot seems to be on the other foot when a bit of trouble heads our way.
On an almost unrelated, and flippant, note. I am *loving* real estate agents doing it tough. Two years ago in my part of Brisbane it was hard work to get a real estate agent to talk to you, and more than one laughed at me for wanting to spend under $600k. Now (that I don’t need them) they call me incessantly (three in the last week).
I may soon resort to calling them, purporting to want to spend a ludicrous amount of money on a house, toy with them for a few hours (you know, go for a drive, waste their time) before ditching them. Unethical? Yes. Satisfying? Bound to be immensely so.
I had a piece about this in Crikey today:
http://www.crikey.com.au/Politics/20090121-NSW-its-a-different-country-to-Australia.html
NSW is really the key here. Any blanket style tax cuts and transfer payment boost (knowing the Labor Party, probably via FTB Part A) will pretty much have an homogeneous effect on the demand side – boosting demand pretty evenly around the country.
But some places need it more others, NSW especially.
If we could just lift NSW’s performance up to something approaching the national average, the consequences for the national economy would be pretty profound. Maybe that’s where any infrastructure spend should really focus – assuming that it would do any good. It would be nice to know just what it is that is making NSW perform so poorly relative to the rest of the country on just about any economic metric one can name.
When the discussion turns to tax cuts it invariably means corporate tax cuts.
Jobs are created by businesses making investments. If the cost of making investment is reduced, which can be through a number of mechanisms but most notably tax cuts or interest rate cuts, then jobs will be created.
Consumer spending does not drive the economy, which is a trick to get one’s head around if you’ve only ever been taught Keynes, so tax cuts to consumers will have little effect.
As has been pointed out, a tax cut for consumers may have the result of people increasing savings. That’s a GOOD thing! These savings are what drives business investment and creates real, sustainable jobs.
If you supported the $10B splurge then ask yourself the question – if it was all spent on Plasma TVs made in China then how does that help?
How does giving money to our auto industry help? Or any other failing industry?
That was an interesting article, Possum. I wonder if any of the public service refugees in the Rudd ranks have a clue as to why the NSW economy is in the state it is, aside from all the partisan interpretations.
Jabberwock @ 15 – I think what Rob is saying is that investment in education is effectively infrastructure investment. Obviously it has more and less quantifiable and more or less immediate impacts. Your mention of R&D spending highlights the fact that much academic research – for instance in CRCs – has the direct goal of creating commercial or commercialisable value. (Disclosure – I work for the Smart Services CRC.) Not all of that is realisable at once, of course, but I thought the argument for stimulus as investment was that it ought to keep delivering dividends into the medium and longer terms. Investment in higher ed per se can be politically saleable (otherwise Costello wouldn’t have been running around trumpeting his fund so loudly), but the Turnbull tax cuts position really queers the political pitch to some degree.
Mark – why NSW is behaving so differently is a
Good.Bloody.Question.
It ought not to be on the whole – it should be very similar to Victoria, but it’s becoming a but of a mysterious basket case.
For anyone interested, I’ve thrown the article up the blog – the charts are a little larger and easier to read.
http://blogs.crikey.com.au/pollytics/2009/01/21/nswthe-economic-elephant-in-the-room/
My guesses about NSW doing poorly: It hasn’t really recovered from the tech bust in the early 2000s; lingering drought effects; taking the brunt of immigration; the overwhelmingly high costs of maintaining Sydney as it hits walls of constraint; a property bubble that kills any chance of wage restraint catching up with debt. The private debt being a direct consequence of NSW doing poorly. It’s a circular screwup that needs a circuit breaker of some kind.
The only one I can think of that would conceivably work is a proper shakeup of the property market caused by a massive overhaul of the internal transport infrastructure of Sydney. That means a bunch of losers in the property market, meaning it will never happen as it’s a kind of cult in Sydney.
Wipe HECS debts and issue a refund to everyone who’s already paid?
I’d spend that!
Mark@18: that’s just it.
It’s “intellectual infrastructure investment” if you like. And there’s projects sitting there ready to go, with little overhead.
The timing is good, as at least some of the people who lose their jobs in the private will take the opportunity to update their skills, or might consider working for publicly funded research if the lure of higher-paying private sector jobs isn’t there.
It’s not a solution, or even close to one. But it seems like you could easily spend some money their and get a better bang for buck than tax cuts.
You’re singing my tune, Dave Rubie.
Polly’s suggestion for a NSW-specific package can’t include tax cuts; the Constitution requires taxes to be imposed equally on each state. It’d be a nightmare in any case.
If, and it disgusts me to say this as a libertarian, if you think you have to spend money in Sydney, the train network is a total disgrace.
However my suspicion that any boosts to funding to the SRA would mysteriously lead to strikes, stop-work meetings and sudden payrises. With no actual improvement. Because that’s all Sydney have gotten thus far.
But Sydney has always been on a planet by itself. It really it is a foreign country — different customs, different language, different attitudes, riddled with latte-sipping idiots who strangely share a universal mania for property with the cohabiting yuppie idiots. It’s basically a San Francisco franchise.
Possum Comitatus Jan 21st, 2009 at 3:18 pm
They are a fantastic set of charts. Probably will be used in the coming election by the Opposition. But never mind. Any chance you could post similar charts for all States?
Any further stimulus package should be multi-dimensional. Here are a few points:
1 – you have to be careful when citing US studies of tax and spending multipliers. Not only is there a lot of debate about whether the spending or tax multiplier is larger in the US (the range of estimates is very large), those multipliers are most likely contingent on circumstances. In addition, even if we could agree on which type of stimulus would have the larger multiplier in the US context, that evidence would not necessarily apply in the Australian context. Unfortunately, there is very little good empirical evidence about multipliers in Australia.
2 – Let’s say that we agreed that infrastructure spending had the higher SR and LR multiplier – we would then have the problem of whether we had enough efficient projects to bring online quickly. Infrastructure spending requires a great deal of planning and should always be subject to a proper social cost-benefit analysis. It might be that the number of projects that would pass such tests and could be brought online in the next 12 months is smaller than the stimulus the economy needs. If too many projects were committed that came online too late, some of the stimulus might kick-in when the economy was recovering quickly, which might mean that the RBA had to push up rates more rapidly than otherwise.
3 – If we assume that the necessary stimulus is larger than what can be provided by efficient infrastructure projects, that brings us to the tax-transfer system. Of course, a lot of things have to be considered – which groups will have the higher spending multipliers in the current environment (probably unemployed, students, retirees, those not engaged in balance sheet repair). The problem with directing tax cuts/transfer increases at those groups is that they don’t make up a high enough proportion of aggregate spending to stimulate the economy on their own. Another issue is that if we assume that the downturn will be temporary, any tax cuts/transfer payments will have to be temporary. Otherwise, again, the stimulus would last longer than is necessary and again bring about higher eventual interest rates. The flip-side of that problem is that temporary increases in disposable income are more likely to be saved.
4 – There is of course the possibility of directing tax cuts at the corporate sector – reducing payroll taxes, corporate income taxes, etc – but any temporary change wouldn’t induce higher investment and in the current environment, many firms will probably hoard the cash rather than increasing investment. It might induce firms to retain more employees, though which would be good.
5 – There are a number of issues with GST reductions. First, in the current environment, if households want to raise their saving rate, a temporary reduction in the GST would have to be very large to induce much higher consumption. Second, there is the issue of revenue for the states.
6 – I have alluded to this already, but any fiscal stimulus has to take into account the likely actions of the RBA. The RBA makes its interest rate decisions taking into account the likely path of inflation in the medium term, and their projections for the output gap. All other things equal, a greater fiscal stimulus means higher interest rates than would otherwise be the case, unless we found ourselves in a liquidity trap. I think that is unlikely at this stage.
7 – On the question of NSW, the reasons for its underperformance are not well understood, and likely to be due to a number of factors – not least of which is chronic under-investment in infrastructure and the high cost of doing business and living in Sydney. One option, if there was a belief that NSW had underinvested in infrastructure relative to other states, would be to direct more funding there. The trade-off for doing that should be that the Commonwealth manages it, and not the NSW government. Of course, we should also recognise the possibility that we are experiencing a longer-run shift in activity away from NSW and toward other states – so NSW may well underperform for some time – directing too much money at NSW could hamper that adjustment and slow the rate of growth in other states.
8 – In conclusion, the best type of stimulus would probably be to bring on as much efficient infrastructure projects (that can be completed quickly)as possible during the next 6-9 months – and then add to that, if necessary, with a combination of transfer payment increases and payroll tax cuts. My preference also is to have a temporary freeze on minimum wage and award wage increases in return for the introduction of either a proper negative income tax or a well-designed earned income tax credit scheme.
Sorry for the length of my response!!!
Man, you say that like it’s a bad thing. Actually, that would be one thing that could get urban renewal going again: earthquake and fire.
…I’m sure Fred Nile’s praying for them.
JC, as you say – Commonwealth tax issues are out of the question, as politically would geographical payments to individuals. But there might be something about the NSW State tax regime that could do with a reform, and where Fed government funds could be used to temporarily top up the foregone revenues from NSW Treasury.
WPD – Ta. I could do that. Might take a look at it sometime over the next few weeks.
One other quick point. Right now, we should all be thankful that Australia’s public finances are in such good shape. Any further stimulus will require the government to borrow on capital markets. Because we are carrying so little public debt in Australia, the capital markets aren’t likely to require much of an additional premium to lend to the Commonwealth. If you want to reflect on how awful things could be, take a look at the spreads on 10-year government bond yields for countries like the UK, Portugal, Italy and Greece – all of which have been much more profligate with their public finances in recent decades.
Of course, Australia has enormous net private liabilities to the rest of the world, which carries its own risks – but that is a subject for another day!!!
Where might it go? Where might it go… I don’t know. But, mate, I have a few ideas mate. Kevvie mate.
.
Maaaate!!.
Looks more like throwing good money after bad. Anyway, Rudd has a centralising instinct. He’ll find some way to move the gig from the Mandarins in Sydney to the Mandarins in Canberra.
Possum, is there anyway to tell if the problem is NSW as a whole, or really just Sydney. If the latter I can think of two explanations besides those that have been raised:
* Delayed hangover from the Olympics (I understand most Olympic cities get one, but maybe Sydney just managed to postpone it somehow)
* That Sydney is hitting physical constraints. Sydney is much worse placed to become a really large city than Melbourne, because from the city center there is a lot more angle taken up by sea. It might be better if the transport hub was at Parramatta. Combine this with the mountains and bays and you either need a much higher population density than Australians think is their birthright, or to expand for vast distances. Melbourne is less dense, but still doesn’t need to spread as far in any one direction. Maybe this has really caught up with Sydney, discouraging housing growth in particular.
If the first point is correct this should be easy to turn around (probably will happen naturally). If the second one is right then we need to be thinking very, very hard about regionalisation.
Possum – a bit more on NSW.
I was reading through your post, and thinking about the idea of how the Australian economy would look if NSW were performing at the national average.
I think there are few things you need to consider.
You would need to be able to separate out the effect of exogenous shocks and the effect of things under policymakers’ control. For example, the mining boom necessarily sucked resources (people and capital) out of non-mining states and into WA, QLD and even SA. To that, you can add the overhang from the Olympics, the shock from the unwinding of the tech bubble (IT was more important in NSW) and now the unwinding of the bubble in financial services (more important in Sydney than Melbourne), and the structural imbalances in the NSW housing market (larger than anywhere else). To that you can add the underinvestment in infrastructure. And on top of that, you can add budgetary constraints – NSW has been a net loser of revenue to the other states in recent years, despite its economic underperformance. The broader problems of vertical fiscal imbalance mean that the NSW government would have had to borrow significantly to invest in new infrastructure – something they weren’t prepared to do. Another thing to consider is that the inflation rate in Sydney has not been particularly depressed – suggesting that it is the potential growth rate that has fallen this decade – that is also backed up by the weak productivity performance over that period.
Governance obviously plays a role in many of these problems – but some others are beyond the control of policymakers in NSW. All in all it is a complicated set of problems that will require a close partnership between the Commonwealth and the state government.
One more quick thing – as the commodity price boom unwinds, you may well see the over-performance of WA and QLD shrink somewhat over the next few years – especially in per-capita terms.
We shouldn’t forget the drought either – the NSW wheat belt, as well as other important agricultural areas have been hit very hard in recent years, and worse than in many other states….
Nothing valuable to say, but Labor Outsider, I do truly enjoy reading your thoughtful responses. Please keep it up!
Seconded.
I think there’s also an issue about “evidence based policy” here. Obviously from LO’s list of pluses and minuses of various stimulatory measures @ 28, policy makers would be being presented with something of a conundrum as to which to choose and in which mix (assuming an in principle decision has been taken, which I think is a reasonably safe assumption). All manner of players are going to have preferences (personal, ideological, related to departmental interests, etc.) – what concerns me a little is Rudd’s ability to be… dare I say it… decisive when the options aren’t clear cut. I don’t think there is much evidence that he understands much about economics – though he does seem to have taken on board the tedious process oriented micro-reform/federalism stuff from the Keating era (probs because it accords with his own bureaucratic predilections and enthusiasms). If I’m right about that (and I’m not excluding the possibility that he might have enhanced his understanding), then we face the risk of either a dumbarsed decision being taken on basically political grounds and/or indecisiveness for too long.
On the latter, I think some of the criticism of the RBA for going to the beach over Christmas has some force. And while I don’t begrudge Rudd a holiday, and Julia’s been doing a good job, nothing was going to happen while Rudd was away and speed may be of the essence in putting together a stimulus package. How quickly will he get back up to speed, particularly if there are conflicts and stoushes among the various advisors and advisory bodies (as there may well be)?
Cheers patrickg and Mark
Mark, your points are very valid.
I’d say that Treasury will have done quite a lot of work already to prepare options for the government. I have no doubt that KR will have asked PMC to have done the same some months ago. But as you say, other departments/ministers will be making their proposals and KR and the cabinet will make their decision with one eye on what is likely to be most beneficial and another on the politics. Good policies will be interlaced with the bad (like increasing the FHOG for existing homes), and politically marginal groups probably won’t get much assistance (sorry students and the unemployed). If we are really lucky, there might be some tax reform thrown in, but I wouldn’t hold my breath.
What I am particularly interested in is what advice the government have received about how quickly infrastructure projects can be brought online. Unfortunately I don’t think they will care too much about the efficiency of some of them, as long as they can begin quickly.
KR obviously doesn’t know much about economics, but he does trust good bureaucrats – Henry and Gruen are pretty smart guys and non-ideological – so hopefully the cabinet follows much of their advice.
Just quickly on the RBA – there are holidays and holidays – senior RBA management will have been getting daily briefing on economic devlopments in Australia and overseas – even circumstances had required it, I’m sure they would have been back in their offices in no time….
LO, off topic, but I just fished this comment out of the spam filter. If your comment doesn’t appear again, please have a read of this!
http://larvatusprodeo.net/2009/01/21/spaminated/
Kinglsey @ 4
Let me give you a little example:
Even if you had a really valuable public infrastructure project to start early last year, unemployment was so low and the economy so hot in WA and QLD that it would have been pointless and wasteful to compete with the private sector for those resources.
However, this year the opposite is true. It is called resource levelling, and gets taught at undergraduate level in most engineering courses. If you have a copy of Microsoft Project, you can fiddle with it yourself without the need for an engineering degree. Not a hard concept for a Government to be able to grasp.
Governments ought to be able to do just a little planning so that their projects are slotted in with private sector activity.
It is the Howard Govt’s apparent inability to work out that you actually need to schedule projects as the resources are available rather than when the electoral cycle says you should throw money at stuff that demonstrated to me its quite average economic management credentials.
Labor Outsider
Really good,insightful posts. As for “KR obviously doesn’t know much about economics” I agree and neither does Swan but for me that’s a strength Little knowledge being dangerous etc.
Much prefer that Ministers listen to advice from up-to-date professionals rather than rely on ‘knowledge’ that is completely out-of-date.
Yep, I think Keating in some ways showed the dangers of an imperfectly assimilated knowledge of economics leaning to dogma – ie J Curves!
Gordon Brown I think demonstrates the problems with a little bit of knowledge even more. Afer a few successful years of economic growth, finance ministers (treasurers) start thinking that the success is attributable to them, rather than fortune or structural factors beyond their control. Keating (with Hawke) at least (IMHO) can claim to have championed a number of reforms that placed Australia in a more sustainable position than had been the case before 1983. Brown was ultimatley responsible for putting the UK public finances in a less sustainable position than he started with, wasting a bucket load of money on public spending that wasn’t properly targeted, and was responsible for the light touch financial regulation that contributed so much to the current mess. And he had the hubris to claim he had banished the business cycle!!!
One of the reasons I have more faith in Obama than in many other politicians (and I hope not to be too disappointed) is that he seems to be someone genuinely prepared to listen to a diversity of advice and then reach independent judgements about the right way to proceed. I just can’t see him lurching from one desparate move to another. I think we are very lucky that it is he, rather than McCain taking the reins in the US….
Yes, I think that’s right about Brown. Perhaps he could only justify the move rightwards by endowing capitalism with all the moral force of the Manse, with himself still cast as the preacher’s son that he was. And I’m inclined to agree about Obama, too, but I’d add that good instincts and decisiveness are also a sine qua non here.
Will the stimulus packages be delivering anything at all to those unsung hero/ines of the Australian economy, the
permanent visa racket puntersOverseas Students?They have taken ‘education exports’ to being our 3rd biggest, (after only iron and coal) and do some very heavy lifting indeed in bankrolling OzEdInc’s domestic operations ( one JuliaCorp spreadsheet I’ve analysed shows an Oz uni where overseas student fees cover academic and non-academic salaries combined, and then some!!)
An Oz frontpage during the week noted the swing being on, with OS students/’parents working out the value proposition is just not there in OzEd anymore. One of the sectors being hit by the de-stimulus package of OS students staying@home is the apartment industry: lots of parents buy one for junior/ette for while they are here. So it’s not just the Boffin/OzEdIncAdmin set who will feel it when the OS student magic pudding dissapears, but the tradie-trafficking industries too. And retail, and hospitality, and hairdressing etc.
Maybe a bit of some significant sort of support package for these folks would be prudent. Or else the education industry might quickly go from being a massive site of casualised re-deployment from otherwise-unemployment in a pretty dumb economy (that it has been for many) to just plain old highly-qualified unemployment.
danny: the big drop in the AUD should help in the overseas student market.
now seems like a fab time to redesign our cities’ public transport systems to me, and in the process look at urban renewal. We can start with Sydney & Melbourne, no probs there.
As far as I can see, we’re going to hit a serious downturn anyway you skin it, and there’s no amount of immediate stimulus to any sector of the economy that’s going to stop that, because we can’t live on consumer spending alone. So it’s time to buffer the most vulnerable from the deprivations on the way, and invest in long-term renewal of our infrastructure, tackling key climate change points along the way.
And what’s not to like about the vision of all our major cities with Paris or Tokyo – level public transport systems of efficiency, elegance and cleverness?
For bigger projects to help out all the workers getting laid off in the west, any very fast train / rail freight routes still needed could be looked at.
Personally it just makes me want to cry thinking about the $10.4 billion spent on trying to get people to buy more christmas presents, not least because the most disadvantaged as usual got nothing (unemployed and students) or less (carers) than farking ‘working families’. Thank god most of them didn’t listen and sensibly paid down debt. But think what more stimulus that money could be providing right now, for eg, to the panicking building sector if it had been offered instead as payments to insulate houses, put in energy efficient / solar hot water / water efficient devices. Would have lowered bills, created plenty of temporary relatively unskilled jobs (eg insulation installation) and had long-term benefits to the most disadvantaged.
Or how about create community gardens and farmers markets to help people access cheap and healthy food & support the rural sector. Or, or…. $10.4 billion would have bought an awful lot of real lasting good and longer lasting stimulus than the lump sums, poorly targeted, did.
I can only hope that most of the population at some point experienced the same nauseating cognitave dissonance I did listening to Mr Razor Gang urging people to spend spend spend. Can we get off this joke of a pyramid scheme now please?
RM (47): True, but as the overseas students’ parents’ “fortune” back home is challenged with the GFC, and opportunities for student work here ( and as I understand, and see, it, overseas students, averaged, depend on working here, bigtime, way beyond the hours they are supposed to per visa regulations, it’s survival) are whittled away with rising domestic unemployment, that “terms of trade” effect will become marginal won’t it?
The guy across the road has
debtisedcapitalised bigtime, turning his newly-purchased modest (inner) suburban house into aslum landlord’sstudent accomodation supplier’s dream, with room for at least ten. He’s looking worried, even before the reno is finished. I seen a few of these “investment opportunities” in real estate windows, eg 1.6 mill for a 14 bedspace establishment. There’s definitely a sizeable non-EduInc overseas student-spending-dependent sector out there (eg the landlords) providing back-end services for this trade-balance crucial industry. It may not be the idea of the economy-saving stimulus package this thread’s about, but is putting all bail-out eggs in the domestic consumption sector, as opposed to focussing on more strategic ones, like the overseas student driven one, all that sensible?Swinburne’s finances show just how exposed things can get in this crucial sector: Government grants don’t cover the academic salary bill, let alone the sizeable non-academic ( 67% of the academic) one; overseas student fees are worth almost (92%) as much as the grants; and it’s already at the top of the list for parity between domestic student fees and charges and from overseas ones (39%). It’s hard to see what’s left to squeeze, except employment, if significant numbers of overseas students stop coming to the party and balancing the books.
My point is, I think: maybe Kev’N'Co should think twice about keeping falling for the cargo cult of generalised stimulous packages, and be a bit more strategic about where they puts our money. They’re familiar with the line of thinking of course, see the misguided car industry, ( and that same workforces skill set and work practices could have been deployed to utility scale renewable energy plant production, sheesh), but I’m not giving very good marks for implementation. If Gerry Harvey’s experience is any guide, the current model of stimulus spennding just isn’t working, why put good money after bad?.
Bloody hell, everyone’s looking for a handout now! The inconvenient truth for lefty, do-gooder academics is your funding came directly from the resources boom, and that funding has all but evaporated.
As I have pointed out many times here, no one gave a damn about the non-resources export sector as the dollar soared past 98c. We sure as hell weren’t offered any bailouts of the likes Kev is now giving to construction, car manufacturing etc.
When you allow your economy to become little more than quarry, you have nothing to offer the world when the commodities cycle turns sour. Combined with staggering levels of private debt and a chronic current account deficit, Australia is headed for banana republic territory.
Have no illusions people, we are headed for a monster budget deficit as the demands for handouts grow ever larger, and government revenue shrinks. Expect the Future Fund to be well and truly raided by the time this little “downturn” is over.
As to the question of why NSW is a basketcase: Perhaps if we weren’t sending our GST dollars north of the border we might do a little better! The clowns in Macquarie St don’t help either.