Sunday, 12 February 2012

A Sugar Faeries Sugar Hit

Judith Sloane, the oo's new "Contributing Economics Editor"  has decided to ignore her own new papers articles, and join in with the rest of the conga line of ruperts historians repainting the pallette of recent events, hoping against hope one would suggest that nobody cares to examine their claims to closely. In her recent outing, she makes the following claim, pushed, interestingly enough, the claims favoured by three stooges of Australia's economic current debate Larry, Curly and Moe.
But as a stimulus spending program, the problem was that the buildings were still being constructed well after the crisis had passed.
In fact, as history actually shows, the timing and extent of the fiscal stimulus, and, more importantly, the impact on our economy, was weighted almost perfectly, and tapered of at precisley the time the economy begun recovering, as was shown in the very paper she is writing in.
The main prop for the economy in the first quarter was the government’s national school’s spending program, which added 0.9 percentage points to GDP. Consumer demand held up, despite the impact of aggressive interest rate hikes by the Reserve Bank of Australia.

This major  mistake she makes really renders most of her remaining assumptions invalid. She goes on about waste (of course, it is an oo trait) even though the report by the Auditor General disagreed with them, and, as Ben Eltham in New mathilda quite succinctly indicated, this perception (which they continue to push) was largely due to the oo itself,
You could be forgiven for thinking schools stimulus spending was a complete flop. It wasn't - and the misunderstanding is largely due to media distortion, writes Ben Eltham
News Limited has largely failed to find any widespread mismanagement or cost over-runs in the schools stimulus program.
Sloane completes her cubist portrait with this hollow warning.
It is therefore imperative to consider the case for fiscal stimulus within a medium-term framework in which the costs of debt servicing and repayment are also taken into account. The short-term benefits of ramping up government spending -- the sugar hit -- are quickly offset by the need to deal with the accumulated debt.\
Interestingly, it is now the libs, not Labor, who are running away from any reference to bringing back in a Surplus to the budget. In fact, they are having their own problems with a $70 BILLION BLACK HOLE. And that is without any GFC to help it along, it is simly a result of too many NO's.


  1. The little bit of sugar went a long way in my opinion.

    It worked and the lady can protest as much as she likes. It does not change facts.

  2. 1. The Reserve Bank was lifting interest rates, to reduce demand, at the same time the government was spending stimulus, to increase demand.

    Do you notice any inefficiency here?

    2. Swan said the purpose of the stimulus wasn’t just to add a little growth; it was to restrain unemployment to (wasn’t it?) 8.5%. Swan forecast unemployment would skyrocket. He got his forecast way, way wrong. The economic conditions of Australia were no worse than those faced during the Asian economic meltdown a decade earlier. Swan’s stimulus was wasteful.

  3. Tom I put this up for ToM to think about. :}

    The Finnigans Beautiful Set of Numbers –
    29th November 2011 Edition

    Independents, International, Media, Polling, Society, The Labor Party No Responses » .
    Nov 29 2011.

    Latest: “OECD said Australia will grow by 4% in 2012 Vs almost recession in Europe & USA” and AAA Sovereign Rating from all Rating Agencies(S&P, Moody’s and Fitch), including Aussie Bonds issued in foreign currencies. Massive confidence in the strength of Australian economy

  4. Pip, so do you think if European governments had-

    • Given everyone 650 euros
    • Installed home insulation and then removed lots of it, and
    • Built a whole lot of school facilities,

    …they’d have fixed their economic problems? Or would they be about where they are?

    Do you think our economic situation might have more to do with a generation of modernisation and reform, than it has to do with the last 3 or 4 years of the ALP government?

  5. The problem with Greece etal, is that for years, their budgets have been running in structural deficit. It has nothing at all to do with Stimulus payments, it is a far deeper problem than that. Of course, it is hardly surprising that yom pushes the line advocated by the three stooges of economic theory.

  6. Right, just as the relatively good economic condition of Australia has far more to do with a generation of economic reform. Zilch to do with home insulation and school halls.
    By the way, the baseless speculation ahs certainly gained some legs.

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