So did it or didn’t it? Can’t someone say definitively, once and for all, if the Rudd government’s stimulus package kept Australia out of a major recession?
In the left corner last week we had the heavyweight Nobel Prize laureate and Columbia University professor Joseph Stiglitz, who says:
“You were lucky to have, probably, the best designed stimulus package of any of the countries, advanced industrial countries, both in size and in design, timing and how it was spent — and I think it served Australia well.”
Marshalling the counter-argument from the right corner today is British historian and Harvard professor Niall Ferguson, who writes in The Australian the most plausible explanations for Australia’s relative outperformance were luck, the economic legacy left by the Howard government, the actions of the Reserve Bank, the strength of China and the success of the mining industry.
“Labor has stimulated the Australian economy,” writes Ferguson, “in the same way that Ned Kelly used to stimulate the economy of Victoria.”
Supporting Ferguson, also in today’s Australian, is Reserve Bank director and ANU economist Professor Warwick McKibbin, who rejects Labor’s claim that its stimulus spending saved 200,000 jobs from being lost.
“The role of fiscal policy was relatively small; that doesn’t mean it wasn’t important, but it could not have been responsible for creating 200,000 jobs… It was never going to be spent very effectively and the nature of the spending was not such that it could be rolled out quickly. Nor could it be changed if the forecasts were wrong, which they were.”
Far be it for us to attempt to mix it with the likes of Professors from Columbia, Harvard or even ANU.
But perhaps, just perhaps, there was another force at play when the Australian government decided to act quickly and decisively with a huge fiscal injection — confidence. The message of confidence such an intervention sent to Australians, especially Australian employers, that their government was prepared to use extraordinary boldness at a time of crisis.
that this topic is subject to argument shows that economic analysis is very limited, even for recently well documented events. Has there been any modelling of the aus economy of what would have happened without the second stimulus package?
Why economic modelling of future events are held in such high regards I will never know.
Is it not so convenient for that pathetic Murdock rag the Australian to all of a sudden produce these wonderfully intelligent right wing ‘ experts ‘ to deny all the benefits of the stimulus package.
How unexpected for them to surface 9 days out from an election. Where were they 6 months, 9 months, 12 months ago? The Govt and others have been singing the praises of the package for over 2 years.
But of course the average punter is an economic illiterate, we cannot understand the meaning and reasons to stimulate the economy during a world wide recession. We must wait for the Murdock press to produce their mates at a suitable time to assist the Coalitions denial as polling day approaches.
They may fool some of the people etc…
Just like yesterdays absurd “we will withhold 20 policy costings”, because of a supposed leak, was a lesson in childish tantrums, so this latest attempt at conning the public will barely cause a ripple. Someone should remind the Australian just how insignificant its readership is.
Ferguson has oblingily stuck a pin in his own hyperventilated reputation and reduced himself to his proper status – just another Murdoch columnist.
You’ll find Niall Ferguson has made other even more fascinating observations. One which should send a chill through Oz citizens refers to how one country doesn’t have to actually govern/rule/overtake another country in order to run it – run it via its economy, of course. Think China, Oz, minerals.
Some one in the media finally gets it. What the government did do was provide a massive injection of confidence into the market place at the right time. If you dont recall there was an increasingly panicked hysteria at the time and our government (along with others) took a measured, firm grip on the tiller.
This in no way diminishes that we were lucky for several other reasons. But do not underestimate how important a factor this was.
All these people who are analysing in hindsight seem to skip over this factor. (I am giving them the benefit of the doubt that they might not have a hidden agenda….). No one can measure or prove/disprove this – it’s kind of a fridge light on thing, but it’s reasonable to assume that it was a potent ingredient.
We all know how quickly the market place can lose faith and run to the hills with their tails between their legs and how quickly the conditions for a vicious downward spiral can come into being. This is what happened in the US. Massive over confidence turning to massive loss of confidence overnight. And ensuing withdrawal into itself.