Talk about rhetoric, this article borders on the ludicrous. Besides telling us how good Labor is with its stimulus package, it contains zero info about the problems that lie ahead for ordinary Australians. I struggle to get ahead, and I am a level B academic.

Heaven help us. Whatever has happended to Labor?

Labor should immediately appoint the ambitious Mr Leigh as a minister for propaganda

You know what really annoys me, and i hope I am not alone, is the silly statement about Australia being the envy of the developed world.

I think most readers of OLO know full well that the benefits Aust has over other developed naitons; notably what is in the ground.

It is about time all serious commentators started to point out the problems for Western naitonsd ahead, and stop making out that Australia is some sort of legend nation that knows better than the struggling rest.

I would have more respect for your article, if you were to report the comparison in annual wage to reasonable new home cost in 2008 or 9 with the same in 1965 or 1970. If you did a genuine check, you wou would find that the cost of a house and land today would be about 10 times in 'wage to home purchase price' to the same ratio as it was in those earlier years, Our politicians over the last 40 years cannot be considered as any better then crap, no appoligies. The same can be said for all the other prices of goods and services, it is the idiot or corrupt politicans with their millionaire mates.

I would suggest that any person wondering about our prospects and how we got to this stage, look up the internet, remembering that we had a depression in the 1930's, so did the US and UK and if you look up "Tax history of the US", "Tax history of the UK" and "Tax history of Australia", also "taxes around the world", Just remember that Australia, the UK and the US all had recession or depression in the 1930's, or really between 1920 and about 1935. Australia's best years were from 1960 to 1970, but they didn't have computers so had to work everything out in their head. Unfortunately our politicans since 1970, don't know how to use a computer and just guess what will make them look good. They miss out badly, don't they? That's being very generous with my beliefs, you don't want to know what I really think, I can't print it.

You forgot to tell us what your point was. Did the introduction of computers make them forget how to add up.

I agree the Libs "all debt is evil" line was pretty disingenuous, but Labour's efforts at selling the reasons were pathetic.
True, we don't *know* the spending spree actually saved jobs, but it seems pretty likely based on conventional (non-political!) economics.
So was maintaining employment such a bad idea, or do we still have a "skills crisis"?
Is cheap labour more important to some interests than job security? (hint: Cheap tied-down labour is more important than *anything* to some interests!)

There is a cost to the future economy of avoiding recessions - some economists view recessions as a kind of economic "spring cleaning" where inefficient entreprises are slimmed down or closed down and economic reorganisation takes place. The absence of any economic downturn will make Australia's economy more sclerotic in the longer term.

Little wonder that the author of this load of obfuscatory crap has entered politics - his training in the Dismal Science of economics and the arcane 'science' of The Law make him emminently suitable representative of the treacherous L-A-B-O-R Party!

The recent global boom and bust cycle has shaken policy makers to tweek some international financial regulations.

These have been baby steps in the right direction. Powerful financial institutions and the corporations that were saved by taxpayers in 2009 have succeeded in resisting substantive reform that could reduce the impact of the next economic cycle.

Their behaviour in activities regarded as 'high risk moral hazards' by main street on-lookers, but as legitimate and lucrative trading in financial services by the big players, are on-track to repeat past mistakes.

Those 'too big to fail' will undoubtedly have their hands out once again for anticipated tax payer bail out funds when the next super bust cycle hits the world's economies in unison.

However, next time round the bail out may not be forthcoming for a variety of reasons, not least of which is the extreme disdain by main street and the lack of capacity of central banks to responsibly finance massive rescue packages to reckless corporate high-flyers.

Regrettably there has been a dearth of co-ordinated international planning for the force 5 hurricane that is in the making. In this circumstance demand for our prized minerals will collapse and we will become collateral damage.

I would have though some open mindedness will show that the stimulas did work. You must also realise why as other countries pour stacks of cash into their economies without the success we had.
It all begins with the tighter baking regulations we have in this country, they saved us from having to bail out our banks which allowed us to stimulate the domestic economy through retail and building keeping the employment levels in check through the darkest days.
This was only allowable because we came from such an incredibly strong starting position that we do have the previous government to thank for. But without question the anchor man to the success was the mining industry and the Chinese economy. Many things fell into place for us to get out of it so lightly.
The questions now have changed. Can Labor atone for the administrative blunders that left all their good efforts during the GFC looking lame and disorganised. They are struggling to recover from the organisational blunders and the financial mistakes created by state administration but should have been noticed and dealt with by the relative ministers. Most importantly can they stay the course back to surplus and then maintain the direction so the debt can be paid off quickly (5-7 years) before China has an economic crisis that will seriously slow our economy

On what basis do people decide whether Australia did relatively well during the GFC *because of*, or *despite* stimulus policies?

A recession is a period of negative economic growth. So if stimulus policies made us better off than we would otherwise have been, that's the same thing as saying they made us richer.

If it's true, this is wonderful news - but why only do it during recessions? Why doesn't the government keep up these wonderful redistributions until none of us has to work any more?

Jefferson,
As i pointed out, using the experience of other developed countries we have been very fortunate due to a group of circumstances going our way. The cash the government injected to the general population and infrastructure would not have had the success it did without many other matters going well for the country. The cash propped up jobs short term it also helped maintain retail sector confidence. Another big factor that i didn't mention was that many employers took the option of putting staff on part time positions rather than letting them go. This also held back the unemployment tide it also ment that as things recovered or never got quite as bad as they said it was quick to reinstate these workers.
The government never made us richer, quite the opposite. It's a smoke and mirrors trick. You take your savings go to the bank and get a loan on future income then spend it, they filled a gap. It is a gamble of course as you are betting things will go well now and you can repay the debt without it hurting.

If economic stimulus (Government trying to win votes predominantly by wastage) is good then why is the US about to exceed 10% unemployment and print billions of dollars more notes. This is after spending billions on stimulus.

No doubt the same economist who totally failed to predict the GFC are now the ones pushing stimulus measure. How gullible can people be? Someone will wake up to the simple fact that you can't forever lend and not pay back. Of course Australia got away with great wastage because Howard/Costello put the money in the bank for the next lot of vandals. Labour just don't get it and now with the loony Greens it will be much worse.

Sadly, Andrew Leigh makes an implied comparison between 'Labor stimulus' and NO use of debt, all for rhetorical purposes. What real life gives is the balance between cautiously responsible use of borrowed money for raising productivity, and unsustainable consumption on credit.

The benefit-cost ration of stimulus spending is seriously doubtful. The happy assumption of past economists that governement spending creates 3 to 7 or so 'multiplier effect' dollars for a dollar of cost is no longer respectable; 1 to 1.3 seems more likely on recent information.

The use of Government subsidies with 'green' justifications has no proven long term returns and should be classified as self-indulgent discretionary spending.

The direct payment of stimulus to people was a great idea but sadly misdirected - I didn't get a bloody cent for all the tax I pay! Yet I support a family of six.

And as for those BER buildings - the more I learn the worse an investment it seems. It is just self-indulgent when the buildings just add to a perfectly adequate stock of school buildings, without any likelihood of increasing the quality of student or future productivity of graduates or the educational system. That too, is 100% consumption spending. 60% for the unions employed on the make-work scheme, and 40% for the rorted managemnt fees of Labor's business partners.

We are doing better than fifty or sixty years ago. I am not even sure we are working harder. Look at the quality and size of the houses we live in today. Look at the number of appliances that today are seen as necessary. In the past if, you had a small fridge, washing machine, iron and vacuum you were doing well. Shortage of power points was not an issue. Then the TV came. There were not phones in most homes. The lucky had one small car in the driveway. It was not unusual to rely on public transport. Furniture was hand downs, second hand or from Waltons on the “never never“. A school were over crowded and stays in hospitals long. Only the privilege did not leave school at fourteen and ten months. We did not need a room in the house to store the children’s toys. A small cupboard took care of the children’s clothes. It was the norm for two or three kids or more to share a room. Overseas holidays were unheard of. When mum worked, it was in some dirty factory or like place where she worked all day on a product lines or other manual labour. Wages were at least three quarters of what the lowest paid man earned. Welfare was paid to woman at the four fifths of what men received. Home ownership was for the wealthy. The lucky obtained liveable rental accommodation. The rest struggled on long lists for public housing that could not keep up with the demand. The above was the reality of the wool boom in the fifties.

People talk about the money that the government “injected” into the community without seeming to reflect that government first took this same money out of the community in the first place.

Those who approve of the economic benefits of this spending never seem to think about the economic benefits that could not take place in whatever alternative uses the people would have put their property to if government had not taken it. Since those economic benefits never took place, we will never know what they would have been.

But one thing we do know. The fact that tax is an involuntary payment demonstrates irrefutably that the people place a higher value on the alternative uses that they could have put their property to, than they place on the value that government did put it to. Thus whereas economising means devoting scarce resources to the most urgent and important human wants, government has devoted scarce resources to satisfying less urgent and less important human wants. In other words, what the government did was the opposite of economic activity; and it is mere fraud for them to claim that they provided a net economic benefit to the community by taxes, debt, spending and redistributions.

Its the old story .. everything is good IN MODERATION !

SOME stimulus was probably justifiable .. but was all of it necessary ? Especially the 'but a new television' handouts ... most of this was spent on IMPORTS of products made overseas ... not helping retain Australian jobs.

Many BER projects provided poor value for money at many times noprmal construction costs .. just rorting !

Even if the budget 'returns to surplus' in 2013, we still have to pay off the debt. Interest alone could well be in the order of $ 6 billion per year ... with a generaous surplus of, say, $ 15 billion per year, calculate how many years it will take to pay off $ 90 billion debt ... probably around 20 years !

Now ask: did we get value for money ?

It was Labor's Paul Keating who sold off the Commonwealth bank.We also sold off all our state banks.There is a thing called the fractional reserve system of banking whereby banks can create money in their computers and loan it our as debt.$91 billion of new money is added to our economy to equl GDP + inflation increases.Most of this money is now generated by the private banking system.This is why we are in so much debt.

Top priority should be to re-establish State bansk who can generate the cash for infrastructure.

see http://www.youtube.com/watch?v=D22TlYA8F2E

It's not debt, it's how much debt. Having a surplus when the GFC arrived was a plus. We are also very lucky to have so much in the ground and an established market through which sell it thanks to previous governments. However anything could happen and it could all fall in a heap. So it is best to be cautious with debt.

Another factor is a flexible workforce and innovative business. America might do better with massive debt than Greece. No one wishes hardship on anyone but in the sense of cutting your coat to fit your cloth, America would have more cloth than Greece.

I think the difference between our stimulus and that in the US was how it was targetted and the speed at which it was done.

The US used their money just to bail out failed financial institutions - something we didn't need to do.

We injected cash directly into the economy to maintain employment levels and then used capital works programmes to maintain and increase the building industry.

By doing it quickly it prevented a sudden rise in unemployment and a loss in business confidence.

Of course having a decent reserve plus a continuing market demand for our resources played a significant role, but to claim is was all down to some strange unrelated coincidence is a bit disingenuous and maybe the result of a short and selective memory.

As for the "many BER" projects providing poor value for money, if you look past the biassed reporting in The Australian and refer to the independent report, it showed that only 2.7% of those were in this category. Those "rorts" were mainly to do with the premium price paid for a sudden high demand and State Government inefficiency.

If he hadn't lost the preceding election I suppose the Howard alternative would have been just to hand out big tax cuts to high income earners and wait for it to "trickle down".

As a small businessman involved in the building industry as a supplier, I want to know when the "financial crisis" ended? My business was about 20% down last year compared to the year before and this year I've yet to make anything at all.

I'm sure the miners are doing well and academics are doing just fine - certainly public servants are doing well, with their numbers growing every year thanks to assiduous empire-building, but what about the great drivers of the economy - retail and housing construction, as well as small manufacturing?

Retail did well out of the Harvey Norman Stimulus Package, but take a walk around any shopping centre for a real indication of current conditions. As well as the usual Spring clothing sales, there are clearances being run all over the shop, especially on premium products. If anybody wants some good cookware, DJs have 50% off the Scanpan and Tefal ranges, for example.

Housing finance is down by over 10% and finance for renovations and maintenance is down by nearly 20%. Builders are going out of business all over the show.Small industrial and commercial units are available to lease at less than the price they were last year and vacancy rates have never been higher.

One of the reasons I'm still in business is that I have no debt. If I did, it may well be worth considering bankruptcy or liquidation, like so many others have done in the past few years. Certainly I'd be a lot more worried about where the next dollar comes from.

It makes no sense to me to be spending hard-won public money on giveaways. If Keynesianism is to be the model, then target the spending to the sectors that are most in need of stimulus, instead of doing a Rudd and trying to buy votes with it. Since Gillard was part of the Rudd cabinet and managhed to comprehensively balls-up the school building program, I can't see much chance of that.

Antiseptic,
You are clearly one of the small business people that was not stupid enough to believe the boom would last forever and run up unserviceable debt.
The boom that the building industry had was always unsustainable. I have been in the industry in one capacity or another for 20 odd years. I have been appalled at the inflation of pricing and some of the slap up workmanship that has become the norm in the industry. The uncontrolled push by realestate agents to drive house prices higher and higher at any cost has made housing unaffordable and unrealistic. There is some real pain in the future for housing and the building industry as the country comes to terms with sustainability and affordability of housing. It is a pity but the short term greed of some will as usual cost long term pain for many. I will agree that the way the stimulas was spent added to this problem, but it was building for many years prior.

Nairbe, you're right about the boom, but you're wrong about me "being sensible enough to avoid running up debt". I would have done just that if I had been able, but the fight with the CSA has meant I have not had a relaible bank account for the past 6 years, rendering borrowing impossible. Perhaps I should be thanking the CSA...

I've saved a deal of money by living on-site at my business, which is probably the biggest single factor in the survival of that business.

The building industry is not one that can be allowed to diminish without a fundamental rethink about the way we want to live. Our population is increasing and hence the demand for housing. House prices can reduce considerably and still make housing an attractive, stable long-term investment, producing good reliable rental income. The price bubble is a short-term aberration that the Howard Govt allowed to develop willy-nilly. It is causing a lot of pain, but I remain convinced that it will not last.

nairbe, I still don't get how one decides whether Australia did relatively well during the GFC *because of*, rather than *despite* stimulus policies?

Obviously the benefit must come after the policy but how do you eliminate the possibility of a 'post hoc ergo propter hoc' type fallacy?

For someone who is obviously educated in economics this simplistic comparison to house mortgages misses a few pertinent points.

A 6% debt against your house is small and easily manageable compared to most who have mortgages up to 90%. However, what Andrew cheerfully skips over is that it needs to be compared against some one who only a year ago, not only had 0% mortgage, but a few shekels in the bank too.

In the space of a year the house owner has racked up 6-7% debt. If he has used equity to acquire something needed, then the debt is a source of funds for other capital.

The Labor government in this case used it on the stimulus spending, and for the hundreds of billions spent has very to show for it. The insulation program has left a sizeable expense to come, and the BER is notable in producing extremely expensive partially useful buildings.

And what for? The Labor government would have us believe that 200 000 jobs were saved, but this figure is closer to 20 000 as mining never really slowed down, and most businesses, having suffered previously from releasing valuable personnel held onto their staff all be it at lower hours.

As any house holder knows, one has to live within one's means, otherwise debt accumulates until it is no longer acceptable. Labor has a consistent reputation for racking up the debt on pork barrel projects, and this last term was no exception.

Shadow Minister,
While much of what you say is true,there is a bigger picture ie how new money is created.http://www.youtube.com/watch?v=D22TlYA8F2E 'The Secret of Oz' .This doco by Bill Still has already won two awards this year and puts debt in real perspective

Arjay,

thanks for that, very interesting doco; i am listening to the latter half.

I am astounded that government debt is considered a problem in Australia.

Our public debt is expected to peak at 5.1% of GDP in 2011.

At present, 121 countries have public debts greater than that figure.

Japan leads the group at about 195% of GDP.

Only four countries have public debt lower than Australia's as a percentage of GDP, none of whom are in the OECD.

That's interesting TrashCanMan. What was it when Labor got in?

There was a time, I can recall, when one would eagerly seek to consume work authored by graduates of such prestigious universities as those those listed in Andrew's resume.

Alas, this piece, with all the factual errors and flawed logic, is but a brilliant display of just how far standards have slipped.