The soon to be massive defecit makes my head hurt. You realise we have to pay it all back? It took the last government 11 years to do it (or just under) and this defecit will be huge. Australia is well placed and employment is good, i think they are over reacting too early and putting us in a terrible position. With interest rates up in the 9s we had somewhere to go with dropping them which has helped (unlike the US/UK). As one of the last of gen Xers I didn’t see the bad tmes but I grew up during them. 18% int rates are but a few years away (less than 10) and by then gen Y will be carrying some debt! here comes the pain…

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Yes, but this only scratches the surface of the inherent faults in the stimulus.

Take a typical middle-income government employee. Minimal chance of losing job because government jobs are secure. They will use their $950 cash to buy a new TV sending the majority of the money overseas to the manufacturer. And, all the Aussie public get for that is one happy citizen.

Instead, why not invest that $950 in new hospital construction that will create jobs for the next couple of years, give flow-on effects to the Aussie tax system and the Aussie economy AND in a year or two, give us all a better health-care system!

I don’t get it! How are cash payments to citizens going to give us a lasting economic benefit?

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I wonder if a website would be considered an asset for the business. I know that they are often taking into consideration when a business is bought or sold, so I would certainly think so.
Licensed or custom built software could also fall into this category.
Any Anthillians that also practice accounting interested in commenting on this?

I am sure that if the IT industry had a clear understanding on what is considered a qualifying asset it would be in a good position to better leverage this stimulus and create new jobs.

Depending on the definition of asset it could theoretically be argued James that your content/articles are assets. Now after saying this and getting your hopes up I would like to say that I am 100% not an accountant or financial adviser of any kind, but for someone that is please comment it would be an interesting read…

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My view, I am wondering why, when the government is OK with blowing $42Bn+ into the economy that they don’t embark on a major infrastructure project such as the diversion of the abundant water supply in the north of our country to the water-starved areas in the south. With the short terms that governments are generally elected they never commit to something that would represent a long term project because the chances are that they will not remain in power to see it through. A major project such as the redistribution of the water resources that would otherwise flow into the sea would make a fantastic difference to this country and save many areas that are suffering from lack of water. Such an enormous project should certainly get the support of the nation as well, and could create a tremendous amount of employment and the money spent would all stay in Australia rather than being spent on items that ultimately are imported etc and the funds end up indirectly going offshore to the suppliers of the imported commodities . Food for thought – but certainly a better way than handing everyone $1k ? I think they are making the decisions ‘on the fly’ without considering the actual short term effect properly. Some consideration as to the value of their investment in the economy should be better considered.

Murray

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Roger Reply:
February 16th, 2009 at 6:09 pm

Re the capture of northern water, the bad news is that it won’t run through the pipe without being pumped. For urban supply in the south, the economic and greenhouse costs of moving large volumes of water from the north are hugely greater than the cost of local desalination, as long as the coast isn’t too far away. In this case, the cheapest option (desal) is also the best environmental solution. Of course, wasting less water is even better.

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Kevin Cox Reply:
February 17th, 2009 at 8:41 am

There is another approach that sounds as though it may work and that is to “pipe” the water through the great artesian basin. Put pumps along the southern most end of the basin and pump water out into the river systems. This now creates a “head of water” running from north to south. Find a way to put water into the north of the basin. No piping costs and the energy costs are a relatively small amount of lifting water a hundred meters or so.

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Luceille Outhred Reply:
February 20th, 2009 at 2:10 pm

But it doesn’t have to be pumped all the way south (and anyway if you look at a map it’s all downhill!!!) You only have to get it to the upper reaches of the Darling… gravity will do the rest.

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There’s a lot of things in the stimulus/panic package that don’t make sense to me either. And it seems the senate are starting to hear some from some economists as well.

The biggest issues I have is what area of the econonmy are they trying to stimulate with the $950 bonus. It’ll stimulate retail, grog and pokies short term. Nothing that actually benefits us in any way now or in the long term.

Why not do something that’ll reduce costs for small business and make it easier for them to keep staff.

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The reason there are no big projects as suggested above is that it would take a few years for these to get off the ground taking into account design, approvals, mobilisation, etc. What the government wants is to prop up GDP figures for the current quarter to avoid the politically suicidal ‘technical recession’ of 2 quarters of negative growth.

The best way to prop up this quarter’s figures is the throw $950 at middle Australia who will buy more plasma TVs, grog and pokies.

I have not received a single cent of ‘stimulus’ for myself or business despite employing 6 people and generating most of our revenue from export sales of high tech software. I am sorely tempted to insulate our office just to get a piece of the action.

The only ‘stimulated’ by this package is Labour’s approval rating.

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I agree with the comments so far. This Government is going to give us another sugar hit. The problem is that it has no nutrition, just a lot of calories. It’s like a Mars Bar, and the effect on the Corpus Economicus is simily. If you keep hitting your body with sugar, your body keeps squirting in the insulin to regulate it, and in the end you become insulion resistant or diabetic. Unhealthy. This is the same. They need to be getting a stimulus into the economy thta has short term impact but which is a catalyst for longer term results. James’ ideas re staff is a good one. So are some of the others.

But lets say the Government is wedded to this stupid cash giveaway – why not do it on the basis they send out to elegible people a pre-paid Visa Debit Card with $950 on it – and a restriction on where it can be spent. EG – fine to spend at a restaurant, but not on pokies. No cash advances on it. Goods must be certified as Australian Made or from companies that are Australian Owned. Let people spend it on Australian Service Providers, like massage therapists, acupunturists, lawn mowers, dog washers, house keepers etc etc. I understand it is quite possible to do this with existing technology.

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What sounds more effective to you? A piece of software gives you little change from $2000 or an identical offering for $30. Would you be shocked to know the expensive one is more effective… let me explain.

I think now is an appropriate time to look at how people value something based on how much is paid for it.
You can pick up any old educational software for $30 online or at a super market. However, I can guarantee you that it will not work better then the $2000 software.
Why? If you have just paid $2000 for your child to use that software it will be used and it will be used properly, the software although just 1 and 0’s has the respect and attention needed for it to be effective.

What happens when you give cash away and encourage people to splurge?
Is that $950 really $950 to the recipients mind, or is it the $30 alternative.

I think many Australian’s have an opinion on what they would like to do with the money and I think this would be a great chance for our Gov to look towards lateral thinking and allow a little bottom up decision making.

Give Australians two options.
1. Take $700 and enjoy it while it lasts
Or
2. Elect the proportions of where you think the sum of $950 should go.

What could be more stimulating to the market and economy then two weeks of leed up to an election styled process where all options on the ballot will get funds but some more then others. The “difference” between those that opted for cash and the full amount could then be used as a buffer where required or distributed evenly amongst the options.

Part of the reason why the Gov is doing this is as a media exercise. To show the world that they will do whatever is necessary. An election styled process would prolong and really maximize the attention and psychological effects of the stimulus. It would get everyone involved and thinking on how they could improve Australia, of course you don’t have to participate but then your share is distributed evenly and where is the fun in that.

Any stimulus package is going to have its pros and cons. However, this is a real opportunity to initiate a new level of interaction in Australia that could well re-ignite that Aussie spirit that seems to be dwindling all to fast.

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James, we are in global economy. Every $ we spend gets distributed world wide. Do you worry about part of $1 spend even on small ticketed items goes to China, India, Saudi?

Let the buck get distributed, it will help our economy as much as theirs.

Secondly, state of economy is more about market sentiment. If you notice, the day overseas markets have rally, so does our market. We are connected and in this mess together.

So lets help each other with out worrying about too much about percentages.

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I too am concerned that it will be fed by some into poker machines, and just wasted in general.
But instead of spending it on products ie laptops per se which are manufactured overseas, why not spend it on local services?
Perhaps it would help the economy if we spent the $950 on business coaching, marketing expertise, an accounting seminar, a PR workshop, a uni student to do your much-needed filing, an organisational consultant to streamline your office processes, a simple direct marketing brochure or memberships to relevant industry bodies.

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While not exactly related to the blog above I would like to congratulate the guys at Anthill on the new site.

All I feel its lacking is a direct link, probably in the front and centre of the homepage, to a delightful little article written a few years ago called “The Window Dressers”.

But seriously guys, the site is fantastic and I know the turnaround time you had from the previous one, very impressive stuff.

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The perception is of a government with respect to the stimulus package is a government in panic not in control.

If it wasn’t so serious it would be laughable. The government is going to go into debt because it is funding infrastructure investment in schools along with other “investments”. To do this they are going borrow money from the banks. But the banks do not have any money so where does it come from? Well the government is to going to allow the banks to lend it money they do not have and the money is going to be backed by the government. For this the government is going to pay interest! This is lunacy. To create the money needed for investment there is no need to involve the banks. Get rid of the banks from the loop and we will reduce the risk of inflation as we will not have to print money to pay the interest and the government will not go into deficit. Traditionally banks get into the loop because their normal role is to impose some discipline on how money is spent and to whom they lend it – a role in which they have failed spectacularly.

It is not getting the money into the system that is a problem. It is the spending of the money wisely (to create the best performing assets for as little as possible) that is the issue and Senators are right to think the stimulus package is not a particularly clever way to do this.

Previous comments have given some ways. Here is another.

A sensible way for a government to invest (and spend) money is to do it through a market place. To stimulate the economy the government can stimulate the market place in infrastructure to reduce greenhouse gas emissions. To get buyers in the market place the government gives zero interest loans to those in society who consume little mains electricity (a more sensible criteria for handing out money than most we have heard). People with loans must invest the money in the ghg infrastructure market place.

If a person who gets a loan can’t think of any way to invest it they can sell the loan for anything they can get – but the loan still has to be spent on ghg reducing infrastructure. Throw a lazy 20, 30 however many billion is needed into the economy this way and watch the economy boom and ghg emissions come down. It will not be inflationary as the loans will be spent wisely (creating a productive asset), and the government does not go into debt. Citizens have some debt that they will notionally pay off through future taxes on profits on their investments.

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Why would we want to live in a false, debt fueled economy, & keep spending on things we don’t really need? Isn’t that what America just did? Any alarm bells?

On the one hand we all say we are pilfering the worlds resources, but when the chance comes to pull back on wasteful spending & move resources into things that are really needed by the world, we can’t stand up and take the pain of the change that will be required. Keep spending, keep spending goes out the call. Rediculous.

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