Recession Obsession

The Government has unveiled a massive $42 billion nation building and employment plan aimed at retaining 90,000 jobs over the next two years and insulating Australia against the worst of the global economic recession.

Billed as a “rapid response” to the deteriorating global economic conditions, the centrepiece of the plan is $28.8 billion of spending on schools, housing, energy efficiency in homes, community infrastructure and roads, and support to small business to be delivered mostly in 2009-10 and 2010-11.

The remaining third of the plan is an immediate injection of $12.7 billion in one-off bonus payments of $950 each for low- and middle-income households and individuals through five bonuses to be paid in the next few weeks through either the Australian Tax Office or Centrelink.

It means 8.7 million workers earning $100,000 or less will receive a lump sum payment of up to $950 each from April.

The unemployment rate is predicted to rise to 7 per cent by mid-next year, up from  4.5 per cent in December.
  
The package includes:

– $12.7 billion for immediate one-off payments to working Australians, families with school-age children, farmers, single income families and for those undergoing training;
 
– $14.7 billion to be invested in school infrastructure and maintenance and bringing forward funding for trade training centres; 

– $6.6 billion for to increase the national stock of public and community housing by about 20,000;
 
–  $3.9 billion to provide free insulation to 2.7 million homes and solar hot water rebates;
 
–  $890 million to fix regional roads and blackspots, to install railway boom gates and for regional and local government infrastructure;
 
–  $2.7 billion small and general business tax break to provide deductions for some equipment purchases before the end of June 2009.

The Budget is now expected to sink into a $22.5 billion deficit in the 2008/09 financial year, a massive deterioration from the $5.4 billion surplus projected in MYEFO, and deepening into deficits of over $30 billion in the following two years.

Gross domestic product (GDP) is now expected to grow by just 1.0 per cent in the 2008/09 and by only 0.75 per cent the following year, compared with respective forecasts of 2.0 per cent and 2.25 per cent made in November.

The unemployment rate is expected to surge to 7.0 per cent in 2009/10.

The latest stimulus package – Nation Building and Jobs plan – will invest $28.8 billion in schools, housing and roads, and handout $12.7 billion in payments to low- and middle-income earners, while aiming to support 90,000 jobs during the next two years. 

The stimulus package has been announced on the same day as the RBA is widely tipped to announce interest rate cuts of between 100 and 150 basis points.

In other business news, some reports are suggesting the many Australians will “sail through” the economic crisis largely unaffected.

Liberal Party Backbencher, Peter Costello has blasted the Labor Government for not predicting or being prepared to handle the global financial crisis effectively.

“It didn’t see this coming, it was administering the wrong medicine, and so what we get is we get these grand announcements almost on a weekly basis” said Mr Costello.

“The thing that worries me in all of this is that it’s quite plain now this government is rattled and it doesn’t have a good grip on the situation” he said.

Meanwhile, I have just discovered that the guy sitting next to me has a Kenny G mobile phone ring tone.

Who should I strangle first..?

 

UPDATE: The Federal Government’s $42 billion stimulus package will boost consumer spending and create construction jobs in these difficult economic times, economists say.

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74 Responses

  1. Ken,

    “Sparta you do realise that your comment makes no sense at all? What do individual incomes have to do with the topic, which is government tax revenues?”

    You’re kidding me……..

    Once you’ve learnt the difference (it’s not really difficult) you can move up to more complicated stuff like the tax base.

    Perhaps you need to revisit those dusty tombs of yours Kenny or learn how to read. You cannot be serious……….

    “After that, you might be able to comment on tax systems without making a complete fool of yourself, although your reference to immigration as if it were relevant makes me rather doubt it.”

    Do you actually have any background in economics there Ken or just picked up on some of the jargon in between acid trips in college? Umm, immigration is relevant and had you the most basic understanding of economics you might understand the reference………Try revisiting the old “supply and demand” curve and perhaps that will get the little cogs spinning up there. Then you can move on to the “labor supply curve” from there. I do apologize for assuming you had a basic understanding of the subject………

  2. The Kenny G ringtone has gone off three times now!!!

  3. Owning my own small business I am really interested in the following initiative of the package

    “$2.7 billion small and general business tax break to provide deductions for some equipment purchases before the end of June 2009”

    Haven’t been able to find any details yet, does anyone know as I am thinking of upgrading computers and software.

  4. Posted at the other site at the same time this one was created.

    Sparta

    I have a simple question for you. What were the tax rates in your country 25 years ago and how well was your country doing then.

    What are the tax rates now 25 years later and how well is your country doing now.

    Now tell me how much those tax cuts for the rich have provided your country with untold wealth and opportunities for all your citizens.

    Tax cuts are a phurphy bandied about by the wealthy to reduce their contirbution to the countries operations yet they are the ones talking the wealth for their own benefit. A tax cut of $2 per week off the poor will do nothing, but billions on infrastructure will ensure jobs and benefit the whole community in the long term.

  5. I have one question for tip

    If they were so aware of the sub-prime meltdown (which I think they all were something could happen, particularly considering Labors less than inflationary Budget), why the hell did the previous mob continue to try and get everyone into more credit?

    According to them, credit was a sign of our ‘affluence’.

  6. reb

    I thought you were on holidays? Is Penang that boring you have to resort to Aus Politics?

    Liberal Party Backbencher, Peter Costello has blasted the Labor Government for not predicting or being prepared to handle the global financial crisis effectively.

    Love the reference to back bencher 😉

    As to the substance of his comments, they don’t align all that well with his election promises. If it was all so obvious, me-thinks the coalitions electiion promises would have been somewhat different – also, Turnbull said last night that things were changing rapidly and all but admitted that the current situation was unpredicable. It seems Pete’s criticisms extend to his own party …

  7. shaneinqld,

    Please tell me how many poor or middle class individuals have given you a job and wage you could live on? Does taking more money from those that create jobs encourage them to hire or fire in such times?

  8. Sparta. Min puts her hand up. Lots of middle class people are employers, just ask scaper.

  9. Hi Dave,

    Penang is fine. Just enjoying a day of rest by the poolside cafe, which has free wifi, so I can surf and swim at the same time!

    🙂

  10. Thumbs up to the education funding. And the measures to help conserve energy. And the focus on small business.

    I might add, thanks to the useless efforts of that dill Peter Costello as Treasurer, the bloody Reserve Bank, a number of greedy savers/investors and the Bush admins war that led to a constant increase in Australian interest rates, this household fixed into an interest rate two years ago that is now looking steep due to this unprecedented drop in rates.

    Consequently, we will not benefit from interest rate decreases until December 09. Many are in the same situation. I would appreciate if the mainstream media recognised such and didn’t generalise when discussing interest rate cuts & RELIEF to homeowners. I’m pleased for some struggling homeowners but as usual it’s also the negligent & risk-takers & those w/ INSIDE INFO who are benefitting.

    I’m giving Peter Costello a middle finger salute right now. Thnx for nothin’ you useless sod.

    Anyway, glad to see Kevin Rudd is growing a Social Democratic backbone. And demonstrating the “courage” we saw displayed during the election process. I hope I’m forced over the next couple of years to eat my recent harsh criticism of him.

    N’

  11. shane

    Details available on the SMH article:
    http://www.smh.com.au/news/national/42b-to-build-nation/2009/02/03/1233423187648.html?page=fullpage#contentSwap2

    Looks like you can claim a rebate of $600 if you butyy a computer worth more than $2k. Some other tax deductions available as well – don’t suppose you need to buy a backhoe – ($18,000K rebate on a $60,000 purchase for that one!)

  12. reb

    let me know what the Long Island Ice Tea’s are like? And don’t get the keyboard too wet there in the pool – electricity and water don’t mix 😉

  13. Dave55 I only just noticed your back from your honeymoon, congratulations and welcome back.

  14. sparta

    Please refer to the wages paid by your US conglomerate Wal Mart (and their other equivalents) to their many hundreds of thousands of staff who cannot survive on their full time weekly wage without government support before you comment.

    The companys response when asked for a pay rise. “Go and ask the government for assistance.” These conglomerates foced the closure of much of the US small businesses in the name of importing cheap rubbish, selling it for cheap prices and pays wages the equivalent to slave labor. Yes a truly remarkable achievement for the betterment of the USA. Try looking at all the vacant shops and small businesses destroyed in every town that Wal Mart invaded.

    We are seeing it here with Bunnings to begin with.

    Really sparta surely you can do better than the old adage of less tax on the rich creates more jobs. Less tax on the rich makes them richer and greedier it does nothing regarding employment numbers. The numbers of employees are based on the minimal amount to provide a basic service to the customers that will not result in the total collapse of the business, nothing more nothing less.

  15. reb

    surf and swim yes, but please no web cam on here 🙂

  16. Dave

    Thanks for the link. LOL don’t need a backhoe but will discuss with accountant options regarding upgrading equipment as I think my tax bill will be quite high so rather pump the economy with some funds.

  17. And what do I get from the package?

    SFA as far as I can see.

  18. aquanaut

    Thanks mate – good to be back.

    reb – are you there – don’t tell me my water/ electricty warning was too late … 😦 Oh, and I second shane’s comments about the webcam 😉

  19. Joni

    What – you don’t need a backhoe?

  20. D55,

    1. I work on the 11th floor
    2. backhoe’s do not fit in the lift
    3. there is only room for one “hoe” on this blog (glances over to SE Asia)

    And so as a single man (gay relationships are not recognised in the eyes of the law remember) and earning over 100K – I get nuffin’

    Unless someone knows better and can cheer me up.

  21. Joni

    Can you squeeze under the thresholds (and do the sex discrimination changes passed last year allow income splitting for this purpose)?

    FROM April, workers earning up to and including $80,000 will get a $950 tax bonus;

    Those earning $80,000 – $90,000 will get $650;

    People earning between $90,000 – $100,000 will receive $300.

  22. More detail on one-off cash bonus at Treasurer’s website here:

    http://www.treasurer.gov.au/DisplayDocs.aspx?doc=pressreleases/2009/010.htm&pageID=&min=wms&Year=&DocType=0

    (Appears slow to load – probably very busy.)

  23. D55 – our posts crossed and so I get nuffin’!

  24. If it helps joni, I think I miss out as well but with income splitting I might get something.

  25. joni

    simple

    slalary sacrifice to super to get your income down to $80,000 per annum and get the bonus then stop your salary sacrifice after 30 June 2009.

  26. further to Me above at 3.05 There is one benefit to married life I guess – even if there are less peas in the jar 😉 .

  27. shane

    Or joni could start a private school … with a backhoe hire business on the side 😉

  28. # Unless someone knows better and can cheer me up.

    Look Joni seeing your sitting on a banana chair in the sun holidaying t…..oh thats reb. Sorry Joni i got nothing.

  29. Less peas in the jar???

    I’ve almost filled the second jar and it gets better all the time…just got to use a bit of imagination…

  30. 😥 😥 😥

  31. You might not get tax benifets Joni. But the benifets for being a good bloke is that you wont be judged on your sexual needs and will have friends to talk to here.

  32. With our rates being cut by a further 1% what needs to happen now is for the Banks to all be forced to pass this 1% cut on to all personal loans and credit cards.

    We see my former employer having to advise the market today that its result will be 20% higher than the market had factored. What a disgrace when they claimed to me only 6 months ago that they needed to drop their commission to me by 30% as the market is intensly competitive and they need to do this to survive.

    See sparta this is what I mean about big business and their lies and greed.

  33. Joni..deep poo if you utter that again..re being single.

    However, earning over $100,000 do you expect a handout??? However, with a partner/spouse now unemployed this should most definitely be taken into consideration.

    Surely if partners are considered as defactos for dole purposes (recent ruling), then one can likewise claim one’s partner. It’s worth an enquiry via HREOC.

  34. scaper …

    just got to use a bit of imagination…

    I can easily imagine a second jar and having both full, just got to work out how to make this a reality 😉

  35. get a barrel you two.

  36. Dave 55

    LOL yep private school using a backhoe and fill it full of computers. Now theres something for you to aim for Joni.

  37. Scaper installs a silo

  38. Min,

    In the eyes of the law for taxation I am single. Same as the ABS census. And so – we cannot get any benefit from being a couple.

  39. I need to see more detail to guage the impact but I don’t like the $12.7 billion handout as it could have been spent on something more tangible for the long term benefit…like more public housing.

  40. Oh no, I can’t stand the thought of joni being 😦

  41. scaper…, on February 3rd, 2009 at 3:10 pm Said:
    Less peas in the jar??? I’ve almost filled the second jar and it gets better all the time…just got to use a bit of imagination…

    😆 …I reckon this post is a demonstration of “using your imagination”? 😆

  42. Gee, I could sponsor another three disadvantaged Aboriginal kids with the handout.

  43. Alright TB, second small Vegemite jar…LOL!

  44. scaper

    Gee, I could sponsor another three disadvantaged Aboriginal kids with the handout.

    Or buy a bigger jar 😉

  45. Actually – I am all OK with this as there are people far more needing of assistance than me.

  46. Joni from: http://www.news.com.au/heraldsun/story/0,21985,24982098-661,00.html. It’s a negative article, but it does state:

    The laws mean gay couples will be treated the same as heterosexual de facto couples in all financial matters, including welfare. Pensioners, NewStart, Austudy and Family Tax Benefit recipients could all be affected.

  47. Min

    And it does say that it is from July 1 2009.

    😥

  48. Nah, I think I’ll get the sponsorships under way later today after the teacher parent meeting.

  49. Joni, what’s another 5 months.

  50. nasking, on February 3rd, 2009 at 2:25 pm
    Anyway, glad to see Kevin Rudd is growing a Social Democratic backbone. And demonstrating the “courage” we saw displayed during the election process. I hope I’m forced over the next couple of years to eat my recent harsh criticism of him. N’

    My sentiments too, N’ (as usual!) 😉

    …………………………………………………………

    Very pleased with the “handout” for self funded retirees… 🙄 and of course the drop in the cash rate was welcome too…. 🙄

  51. Let me know how you go scaper. Via World Vision there is no sponsorship program where people can donate to individual Aboriginal children. I’ve tried to do this via World Vision and the answer was no.

  52. Min, I sponsor through the Smith Family and specify Aboriginal kids only through the Great Southern Cross Consultancy.

    What you have to do is put a note on the form re Peter McInnes with your request and when there is the right kid the sponsorship will begin.

    Sheesh, it’s only $27 a month!

  53. Woohoo – Westpac has cut the variable rate by the full 1% (still have a bit to go to make up for not passing it all on last time though) and Credit Card by 1% as well.

    http://business.smh.com.au/business/westpac-passes-on-full-cut-20090203-7whm.html

  54. Finally I get something today… the full 1% – woohoo.

  55. Thank you for this scaps. Apparently, you cannot sponsor Aboriginal kids via Costello’s World Vision, but can via the Smith Family. Our sponsorship of our gorgeous little Estere is coming to an end and I would rather in the future sponsor an Aboriginal community who are also at need, who likewise do not have fresh water.

    Re the cost, I figured that swapping from coloured perfumed loo paper to generic would cover the cost. And that’s the truth of the matter. I personally am sick of all the whinging about doing it tough..that one’s million dollar condo has now depreciated in value.

  56. I wonder whose honeymoon will end first. The Prime Minister’s or Dave55.

  57. “Actually – I am all OK with this as there are people far more needing of assistance than me”. (joni).

    Well said joni and my thoughts exactly. I spent a few minutes on news.com looking at what the RWDBs had to say about the packake and they were going absolutely ballistic.

    Half claimed that Rudd was ruining the country while the other half spat the dummy because somebody else was going to get a bigger hand out than them. Hellooooo – why complain if you’re earning more than them.

    I pay tax. I like paying tax. The more I pay means I’m earning more. Some people begrudge their taxes going to help the less fortunate. I have no problem whatsoever if my tax goes to helping a struggling Aussie.

  58. Miglo, on February 3rd, 2009 at 6:29 pm

    Used to say the same when I worked, Migs…

    …but then we vote ALP don’t we?

    (Just pay tax on my super earnings now)

  59. Miglo @ 6.18

    LOL, just checked back on this thread and I’m glad I did.

  60. Mr Turnbull wants tax cuts instead of cash payments.

    Well I look at it this way.

    $950 for those earning $80,000 or less equates to a $18.27c tax cut per week for the next 12 months.
    $650 for those earning between $80,000 and $90,000 equates to a tax cut of $12.50 per week for the next 12 months.
    $300 for those earning between $90,000 and $100,000 equates to a tax cut of $5.77 per week for the next 12 months.

    The positives are as follows
    1) Earners of salries over $100,000 are not benefitting from government money for the first time in 12 years.
    2)Our tax revenue base stays the same enabling the government to continue to receive revenue and reap the benefits as the economy improves.
    3) It is extremely hard to incrcease taxes again after reducing them so in the end infrastrucutre and welfare support decline to levels in the USA where bridges are falling to pieces and their infrastrusture is decaying at a rapid rate due to lack of manitenance.

    If we give tax cuts to the low income earners these cuts also get handed to the wealthy who do not need them and we also reduce the governments capacity to generate revenue in the future with a short sighted knee jerk reaction to screams of the wealthy.

    If you want to see the result of continuous tax cuts to those who do not need them, then look no further than the defecits of the USA where tax cuts under Reagan, George Bush Mk1 and George Bush Mk2 have destroyed the taxation revenue base of the country to the extent that the country is on its knees.

  61. Excellent summary Shane and yet Turnbull is still saying that tax cuts were the way to go. As you say, tax cuts once delivered are very difficult to get back should the additional revenue be needed. And especially the reversal of the previous trend of giving more to the wealthy and the least to those with lower incomes.

    On a slightly different note, anyone know of the details re insulation? That is, what is the criteria for qualifying. I know that it includes older homes..which would be wonderful for the elderly (including my mum).

  62. If we give tax cuts to the low income earners these cuts also get handed to the wealthy who do not need them and we also reduce the governments capacity to generate revenue in the future with a short sighted knee jerk reaction to screams of the wealthy.

    Problem. It’s about existing markets infrastructure and cash and credit flows. The ‘wealthy’ spend in markets which are not separate from the rest of the economy, and that spending in those markets is not limited to expenditure on ‘wealthy’ things or limited to employing ‘wealthy’ people or even necessarily is expended against the interests of the ‘hoi polloi’. Arguably, it’s those with additional surplus who previously spent on speculative things like R&D and expanding the productive base, and contributed to markets infrastructure for those things. Even the idea that the banks were doing less than just bundling up packets of sub-prime debt is challengable; bundling the debt and on-selling it freed up capital to do other work; and it’s the intermeddling of that debt that is the problem. It’s why conflating naughty bankers with a more pervasive politic of greed is dangerous, for its tendency to deny common wealth’s role, albeit it badly concentrated in too few hands, in development; it’s also why looking at the public stock-market and other private stock markets like a casino is wrong; they’re companies presumably performing work to generate a surplus. For a good student of Soros, even, reflexivity for the real economy would include a notion of a social tendency to overshoot in both directions; and arguably, suggesting that the common wealth presently held in the wealthy’s hands can just be allowed to wither, along with the markets that it sustained, imho, is short-sighted.

    The point being: drop-offs in segments of aggregate demand aren’t necessarily a good thing for an economy, which consists of an inter-locking cascade of markets, in recession; and there is no basis for ‘justice as desserts’, as opposed to ‘justice as fairness’ outside of an ideological lens without some empirical substance to it. I’d expect, at least, some empirical evidence for the assertion that we, the collective, don’t need to ensure that the oil, however thinly spread, reaches all parts of the engine before allowing some bits of it to grind metal, given that the destruction of wealth presently occurring is not re-distributive, it’s just plain destructive.

  63. Min and Shane

    The thing is we will get tax cuts in the middle of the year. Turnbull was advocating moving these forward 6 months to start Jan 1 this year. This would have been an option however ther Government, rightly or wrongly, determined that one off cash payments in April would be a better stimulus.

    The evidence tends to suggest that the Dec package was a success but that not all of the cash has been spent. Most economists are predicting that the bulk of it will come through in Jan – Feb. Having an extra kick in April (to be spent April may June) and then a permanent ongoing weekly injection from 1 July in the form of Tax cuts is probably quite a smart way to acheive the same thing as the tax cuts. The biggest plus for the cash injections at this stage is that the administrative burden is incurred by the Government and not business. While businesses will need to update their accounting software for the 1 July tax cuts, this would have been planned – to move the threshold change forward by 6 months could have created administrative probs for businesses.

  64. Legion

    There are many millions of australians earning less than $80,000 who will get an extra $18 per week for 52 weeks.

    Expenditure by the wealthy on R & D and opening businesses and employing epople will not die simply because they did not get a tax cut that wen’t to the poorer employees. This is a nonsense. As for allowing the wealth of the rich to wither, I certainly think they will still survive through their tax havens and distribututions to their families before their companys do wither. If the rich own 2 million and it withers by 50% they still have 1 milliom. If the poor own 50,000 and it withers by 50% they have 25,000. Now let me see, who can sustain even a meagre existence for a period longer than 6 months.

    problem about the oil Legion is that is is going to EXXON and BP and CALTEX.

  65. shaneinqld, on February 4th, 2009 at 10:08 am

    None of those are arguments are empirical, nor do they address the argument as model I presented.

  66. Legion

    Then please put your argument and model in words that people like myself ( the majority of the population) will be able to comprehend and understand.

  67. shaneinqld, on February 5th, 2009 at 1:39 pm

    Shane, my argument-as-model was a musing…which might slot somewhere in amongst the effectiveness test for government-as-agent’s interventions into markets and the economy on a medium- to longer-term…

    Part of what is being lost to society as the GFC grips is stored wealth, or stored grain in a silo, which does real work in an economy; where it’s located or concentrated is a second-order issue that I put aside for the time being. That aggregate wealth, much of it sourced previously from the real economy, is being destroyed destructively, and not creatively or productively, which has implications for society every bit as much as the instant loss of individual jobs, which only goes to the present crop. It’s why most economists keep coming back to the issue of credit for the economy in general, and credit’s (in)availability, not the percent or two of GDP which government can galvanise and which seems to occupy the public mind; without getting that credit flowing again to the farmers and the farms, and maintaining their private infrastructures in the meantime, the present crops will fail to thrive, and the dwindling store of grain also will be unavailable for re-planting. Focusing only on the present crop, and ignoring the rapidly shrinking storehouses and the destruction of farm infrastructure held in private hands, will lead to reduced crop returns in future and a lower standard of living for everyone, especially as former farmers and seed-collectors find their farms broken up and reallocated into nothingness, not because of any creative destruction yielded by innovation or competition, and simply join the ranks of the unemployed.

    Mind you, a peasants’ revolt in Ancient Aegypt over the social (in)equity of previous grain distributions vis-à-vis present grain largesse in the middle of a blazing drought does have a certain naive appeal as the pyramid collapses. To the extent that my musing holds, however, I’d tend to co-locate society’s ‘need’ and am dubious of an a priori devil-take-the-hindmost policy applied anywhere in the economy without an assessment of the direct and indirect opportunity costs to society of a particular programme.

  68. Legion. We can all talk clever. The sign of intelligence is to be able to convey one’s thoughts into a language that everyone can understand.

  69. Legion

    I am sorry I find your blogs overwhelm me with the use of anecdotes and huge words which could be conveyed far more simpler.

    As a result I will not respond for fear of once again being empirical with my comments.

    Are you Kevin Rudds speech writer under cover ?

  70. Min, on February 5th, 2009 at 5:57 pm

    I just talk, Min…I leave to others a social commentary on dialects and how some people speak funny Engrish.

  71. Legion, it would be wise to postpone the largesse until it is indeed needed as to feast on the grains that will be required to plant will be spent for no production and the farmers and their stock will starve!

    It is best to produce the hay when the sun shines, not in the coldest season as surely the crop will wilt and the fields will be bereft of the sustenance required for future consumption.

    Without the cultivation the noxious weeds will thrive and spread the seed asunder and it will require constant plowing that will further delay the production due to the dearth of seed producers.

  72. Legion..with apologies. We all have our passions. Min goes droop.

    Must now most definitely choof, ye olde corned beef, mustard sauce, mash and veg ready to go.

  73. “mustard sauce”

    is that with a white sauce base?

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