AJFA, in some ways the stimulus is now a victim of its' success: http://www.theaustralian.com.au/business/mining-energy/resources-boom-effects-on-economy-starting-to-reappear-battellino/story-e6frg9df-1225833578683

It was probably about $10 bn too big, but sitting back in January 2009 and assessing that would have been very hard. I agree on industry welfare for 'green cars' (appalling). Diesel is far more efficient than even the best hybrids and there is little to think that Ford and Holden will build hybrids (nor would they sell them in all likelihood). Nor would it actually help the economy is they did. How about zero tarriff on cars that do 50MPG or better.

I think more general stimulus measures should have been more prominent, like a 20% payroll tax cut and now we are seeing the unravelling of some (but certainly not all) direct programs. I do consider that the $900 cash bonus measure was effective, but it would have been better to have made it even more targetted and to have used the savings here for tax relief to low income earners, thereby the wage freeze (see Fair Pay Commission decision in June 09) would have been a reasonable long term trade off for more job security among award earners.

I think you have to accept that the stimulus was on balance, good policy though. It was temporary and reasonably targetted. Where it has failed is that it was probably too big (in hindsight), but the risks on this meant that it was always better to have a stimulus that was too big.

How this now reacts with re-regulating the labour market will test the flexibility (left) in the economy. http://www.onlineopinion.com.au/view.asp?article=9406

I do consider that Gillard has tried to reduce the negative effects, but the policy has obvious flaws, some of which I highlight in my article, and more precisely here: http://www.theaustralian.com.au/news/opinion/on-the-wrong-track-when-politics-drives-wages-policy/story-e6frg6zo-1225769982854

Tristian, mate, join the 21st century. Stop confusing means and ends: http://www.theaustralian.com.au/politics/opinion/markets-bring-mobility/story-e6frgd0x-1225781310921

Corin,

Concerning the stimulus, there's a number of important points:
1) many other factors contributed to Australia avoiding recession, not just stimulus
2) the money on insulation and school buildings was spent inefficiently. See this blog for detailed analyses: http://catallaxyfiles.com/
3) deaths and house fires have occurred as a result of insulation

Here's an excellent article that I would recommend: http://www.theaustralian.com.au/news/stimulus-may-not-work/story-e6frg7b6-1111118793315

What amazes me with the insulation furore is why the government didn't keep in simple and easy by using tax cuts. Malcolm Turnbull's idea of bringing the tax cuts forward was therefore more sensible. I agree the $900 handouts were OK.

Even if the GFC had been worse than feared, at least we wouldn't have blown 5% of GDP in the initial months and we would still have had room to move for when a recovery is forseeable.

But then, you can't take as much political credit for tax cuts. Greens for one don' like tax cuts, but they like insulation because it may reduce energy consumption. Furthermore, it was hoped that all those tradies working on the school gymasuims and halls at inflated prices would return the favor by voting Labor.

But because they wanted to make it complex and spectacular, the whole thing has now blown in their faces.

This surely should be a lesson for Kevin Rudd about the limitations of Government activism.

Corin: you say -

"Tristan, mate, join the 21st century."

But old ideas are not necessarily bad ideas. The idea of democracy - although then implemented in a highly imperfect fashion - goes back to ancient Greence. And although I don't accept the provisions of that ideology - it's nevertheless worth noting that the roots of the dominant neo-liberalism go back to 18th Century economics...

Yes there's always pressure to observe "intellectual fashion" - and it seems there's never any shortage of people willing to promote these 'fashions'. For decades this has helped keep the Left on the defensive... The point is tha there's always something 'new' - which is employed to co-opt the relative Left, but does not meaningfully challenge neo-liberalism, and the inequality and human suffering this entails.

It's all very well to recognise a legitimate role for markets; for price signals, and other signals that drive efficiency and innovation.. I don't disagree with this... And for your information - I don't oppose church-run schools on principle either - I simply oppose the privilege of many of these schools - which I feel is against basic Christian precepts... I cop a bit of flak for this from some quarters also...

But policy instruments such as progressive taxation; a broad social wage of the kind found in Denmark, Sweden, Holland; robust minimum protections for wages and conditions; observing the rights of workers to withdraw their labour - Attempts to brand these mechanisms 'old', 'irrelevant' - just comprise a mechanism to reinforce the dominant ideology... It's meant to appeal to people who just follow the intellectual fashions of the day...

BTW - anyone reading this - feel welcome to carry this debate over to my article today on ALP and the unions as well... (Feb 24th)

sincerely,

Tristan

nb: When I say 'I don't support that ideology' - obviously I mean I don't support neo-liberalism. I certainly do support democracy. :))

"But old ideas are not necessarily bad ideas. The idea of democracy - although then implemented in a highly imperfect fashion - goes back to ancient Greence. And although I don't accept the provisions of that ideology - it's nevertheless worth noting that the roots of the dominant neo-liberalism go back to 18th Century economics..."

Yes Tristan. But when old ideas have been discredited and/or refuted, they ought to be discarded. Pick up any first year economics textbook and it will explain to you why high tariffs, subsidies, government ownership of enterprises, inflexible labour market policies and high taxes for companies and the rich result in lower economic growth, higher inflation and higher unemployment. Whilst you obviously are very passionate about what you believe in, you do not seem to have considered the negative economic consequences of what you promote.

Like most Labor lefties, your heart is in the right place, but your idealism does not help those you want to help.

AJFA

Look I wouldn't pay too much attention to Catallaxy (though I accept they have a strong point of view). I accept that a good deal of the stimulus was waste, but I still think they erred rightly that too much was better than too little.

As I said, with the benefit of hindsight, the stimulus probably should have been up to $15 bn smaller. I also accept that they got little by way of 'reform'. I also agree that tax cuts could have been used for those on the 15c rates if no one else.

You have to be careful in using tax cuts when there is a structural defacit as the long ternm fiscal position would get worse than even the big stimulus they have used.

Tristan, I'll read your article now. Old ideas are good ideas, sound like a sound bite for Abbott too ....