Comments on Alan Kohler “Driven to distraction”, 26/06/2009, http://www.businessspectator.com.au/bs.nsf/Article/Driven-to-distraction-pd20090626-TCSWT?OpenDocument&src=sph
Both the government and the opposition have shown remarkably poor performances over the last 6-8 months.
While fine points may be get easily lost in a political debate, the government cannot be and will not be strong in simply saying that its defence that its stimulus worked.
No one will argue that fiscal stimulus will not have any effects on the economy. The real question is how effective it is.
The government handed out cash to the tune of more than $10 billion in November last year. While large part of that may have been saved by the end of the first quarter this year, some of it had been spent and was counted as part of the consumer expenditure in the GDP.
Yes, that extra expenditure may have helped prevent the GDP went backward. But that does not mean the government's cash handouts were a good and responsible fiscal policy to stimulate the economy and protect jobs.
Just to argue the point, if a government minister gave $1 billion to his or her closest mate and ask him to give half of that back to him or her as kick back and spend a quarter of that to buy anything.
In this hypothetical scenario, $0.25 billion would have been spent in the economy, thus increase expenditure and GDP. Because of that, the stimulus worked, according to the line the government has been using. But would that be a good fiscal policy to stimulate the economy?
Were the government’s cash handouts very different from this hypothetic scenario? Is it that hard for people how weak the government's defence is? By the same token, it is not too difficult either to see how ineffective the opposition has been.