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The Forum > Article Comments > A time to spend ... > Comments

A time to spend ... : Comments

By Fred Argy, published 21/1/2008

With an impending economic slow-down there could be a need to revisit contra-cyclical fiscal policy.

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Dear Fred,

You have anticipated all the potential cynics remarkably well.

Any feedback on these views from Treasury or RBA. Do you talk to them these days.

One issue you did not address (I think) is the mis-guided fiscal stimulus of the big tax cuts. Your argument could be sharpened by recommending redirecting the savings to far more important things.

Best wishes

Andrew
Posted by Andrew Elek, Monday, 21 January 2008 10:13:31 AM
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Slightly irelevant probably but a Question. If governments always try to run supluses does not the in the end country run out of money? In the short term will credit explosions compensate but as I understand it credit is a zero sum game? Or simpistically where does the money come from to pay the interest?

Equally govts can ever really be short of money but short of resourses to actually spand it on? Good eg. = Health/Hospitals where they is and will be a drastic shortage of skilled staff because of lack of investment 10 years ago?
Posted by Richard, Monday, 21 January 2008 10:22:02 AM
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Let us as Australians do something of vision - not just the regular health and schooling issues. Let us, via our federal government, build the inland railway line linking Melbourne and Darwin.
Posted by Country girl, Monday, 21 January 2008 12:29:50 PM
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"whereas only a small share of the tax cut is assumed to be spent and rest saved”.

Savings are exactly what is required to stimulate the economy.
Posted by RobertG, Monday, 21 January 2008 4:20:39 PM
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in the early 2000's when the cpi was around 2% , many australian house prices rose by up to 80% or more per year.if governments are to reduce inflation they have to look at home prices and credit card debit.if the government can stablise home rentals and home repayments, this will be the key to reducing inflation, homes firstly should be for people to live in and not seen as an investment tool, people who buy and sell existing homes for investment only ,should receive a high tax penalty and people who build new homes should receive a tax incentive, australia urgently needs the supply of new home to be increased , there is something very wrong when a house comes up for rental and over 50 people line to make an application for it. it is unbelievable that in australia we have so much vacant land yet there is so much shortage of new homes going up, reduce the gst on new houses for 5 years and cut state government taxes on new houses would also help. without using virgin land, there is so much land going to waste in urban areas that could be used for housing, example, all the space on top of shops going to waste and all the railway land that could be used for commercial and housing developements. if people are only paying a fair amount to keep a roof over their heads and retailers were only paying reasonable rentals for the premises there would be no need for this high inflation to happen, the key to inflation is property values, supply and demand
Posted by ROOFOVERHEAD, Sunday, 3 February 2008 5:35:54 PM
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Statistics state that we Aussies owe a staggering $43 billion in credit card debt. So the RBA believe that because we "spend" on the card we must be a "flush" economy as we can pay for it.....wrong.

For those who live on their credit cards and their weekly/fortnightly wage pay to pay ..... the message is now out to you all.

Get rid of your credit cards - ASAP - don't use them, put into place the old "rule of thumb".....if you haven't got the cash to pay for it - save up. It's really fun to save up, as when you do it is a sense of achievement. Don't put it on the credit card.

If you are paying the nominated amount per month on your credit card, that $3,000.00 dollar article will take you years to pay back, and who is laughing all the way to the bank - the banks or moneylenders at your expense.

Our biggest investment is our mortgage - our home, our castle, which we all don't want to lose.

My suggestion - make a budget, you get X amount of dollars per pay, divide your pay into expenses (ie mortgage, credit card payments, utilities etc) plus put something aside for saving ....but do some homework as there are many different banks out there giving good interest on savings.

If we all did this - this would be a start in reducing the billions owed in credit card debt.....why should you be hounded and put to stress by the debt recovery agencies.
Posted by SAINTS, Monday, 4 February 2008 6:20:19 PM
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Fred” The big challenge with infrastructure spending is that projects with sound benefit-cost ratios have to be ready to implement quickly “

I am pleased you made the observation to “sound benefit-cost ratios” no one, except those immediately employed, and they only whilst employed benefits otherwise.

Certainly something which is best pursued, counter cyclically, during non-inflationary demand times, when the private sector is less likely to compete for scarce skills and government joining the market would only increase pressure on wages inflation.

However, your further comment “and they should be capable of being cut off or slowed down when the economy recovers.”

I would observe, usually the “benefits” are only attained when the project is completed. Spend at the 75% of the effort / expense point and the usual “benefit” is zero.

So having made the observations above I would ask, could you name some of these “infrastructure projects” which you speak of
Posted by Col Rouge, Tuesday, 5 February 2008 12:37:00 PM
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