Thursday, November 01, 2012

Stimulus failure

Back in 2009, the Australian government panicked. It saw the global financial crisis and immediately pulled the Keynesian lever: they cut a cheque for $900 to every Australian for a shopping subsidy—which was paid for by every taxpayer.

How much extra spending did each $900 “stimulate”?

About $20.

Just twenty dollars for every nine-hundred dollars poured down this particular drain.

In fact, even the original unpublished paper on which the “stimulus” was based, now its finally been published, only talks about a fifty-dollar spending increase. Fifty dollars over seven weeks.

Not bad for a “stimulus” package which cost taxpayers around $16 billion and helped plunge Australia into an immediate $22.5 billion deficit*.

Mind you, good luck getting a Finance Minister to admit that. (Not without a Lockwood Smith in chair forcing her to address the question.)

“I wonder,” wonders Sinclair Davidson, “if politicians had been told …

‘Quick. We have to get people spending and if we give them $900 they’ll rush out during a seven week period and blow $50.’

… whether they would have been so keen to spend the money?

* * * * *

* The full “stimulus” package cost around $42 billion, half of it borrowed, hiking the govt’s debt to about $118 billion. This debt mountain now represents around 10% of GDP, and has climbed every year to now stand at nearly $150 billion. Last year’s deficit alone was around $44 billion.

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