The stimulating stimulus

It seems that as time passes – more and more of the stimulus package seems to be having the desired effect of, um, stimulating the economy.

An unexpected jump in commercial lending commitments is evidence that business is responding to the federal government’s economic fiscal stimulus package although a definite trend is yet to emerge, economists say.
The value of commercial lending commitments in March jumped by $5.187 billion or 20.5 per cent, in seasonally adjusted terms, to a five-month high of $30.498 billion, Australian Bureau of Statistics (ABS) data today showed.

Just sayin’ – that’s all.

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43 Responses

  1. Likewise..just sayin’. My 84yr old mum receives an extra $30 on her pension..and believe me, she won’t waste it. Then there is mega for roads and infrastructure such as the black spot in Qld where 57 people have died. And this is in a safe National Party held seat..which says something in itself.

  2. That is the thing Min (squishy hugs) the stimulus was always going take time to work through the economy to have it’s desired effect – which is why the government (on the advice of Treasury I suspect) needed to act quickly and desicively.

  3. Here’s a response you can count on drink to from the Libs: Yes, but what about the jobs?

  4. So, what happens when we actually go into recession???

  5. Scaper

    I think the stimulus was planned to make the recession shallower and shorter.

  6. Joni

    Then why the enormous drop in revenue??? Your link seems to show that the economy is going gangbusters. Its actually been a great recession especially if you have a mortgage. Our terms of trade are still good. We are exporting more to China than ever.

    So why did our budget go from a $22B surplus to a $57B deficit in just 18 months???

  7. Neil

    That is a very very good question, and one to which I have not been able to find an answer at the moment. I have intermittent internet at the hotel, and so reading the budget papers to find the answer is a challenge to say the least.

    When I find out why revenue has dropped I will put the answer up for all to see.

  8. So when and if there is another shock where is the money coming from when it is really needed?

    The way I see it the bank account has been drawn down, the credit card will be maxed and there is no more assets to offload.

    Why does the word ‘banana’ keep coming to mind?

  9. Joni, I suggest you look at the forward estimates from last year, you might find the answer.

  10. The infuriating thing is that the Liberals, in their last term in office, spent $314 billion (94% of the mining boom windfall), and the present government has to borrow to meet the downturn. What is there to show for the 314 billion that Costello and Howard spent anyway?

  11. joni, scaper and neil

    GDP has dropped by around 3.5-4% and this affects corporate profitibablity which in turn flows through to reductions (big ones) in corporate taxes (4% of GDP equates to around $40Bn). Added to this is reductions in capital gains tax due to reductions or stabilisation of house prices and large falls on the stock market. The falls on the stock market will actually play a role for years as these capital losses flow through in subsequent years to reduce income taxes.

    Increases in unemployment benefit payouts as unemployment rises (as compared to the estimates) and resulting loss of income tax also play a role in the difference in estimates.

    The Stimulus has worked but only to cushion the blow. The purpose of the stimulus was always to prop up the retail sector in the short term until infrastructure projects could come on line and feed through further money into the sector from wages. The projections that unemployment would hit 10% without the stimilus are probably about right. While the costs seems high now, having an extra 1.5% on the unemplyment lists has much higher costs for the Government in terms of outgoings (dole) and reduced income (taxes). The debt aint pretty but it’s a damn sight better than what would have occured had there been no stimulus at all.

  12. One further thing on the stimulus and debt and the cost for future generations.

    Yes us tax payers will need to pay of this debt into the future and babies will be born into a country with a debt BUT we are also beneficiaries of the investment in universities, rail and road projects, hospitals etc. There are plenty of benefits that far outweigh the debts.

  13. D55 – great response – much appreciated.

  14. From Budget Paper No 1 – Statement of Revenue

    Since the 2008‑09 Budget, taxation receipts have been revised down by $173 billion (or 14 per cent of total taxes) over the four years 2008‑09 to 2011‑12 as the global recession has significantly affected the Australian economic outlook and income. This includes $60 billion of downward revisions since the February 2009 Updated Economic and Fiscal Outlook (UEFO).

    Adding in the 2012‑13 year, total downward revisions to taxation receipts since last budget would be around $210 billion over the five years from 2008‑09.

    One can chase up the details here. http://www.aph.gov.au/budget/2009-10/content/bp1/html/bp1_bst5.htm

  15. Dave, the stimulus may or may not have worked, but has this so called blow eventuated yet?

    Time will tell but I have an inkling that there is further to go before we hit bottom, I might be mistaken.

    I stand by my opinion that it was too much too soon.

    Oh, isn’t this prediction that there will be 4.5% growth from the people that never saw the GFC coming?

  16. I see the stockmarket is down around 3.4% today.

    Must be an aberration…

  17. Dave55, on May 14th, 2009 at 5:07 pm Said

    Yes us tax payers will need to pay of this debt

    Might be somewhat misleading if one interprets that to mean individuals and only individuals.

    Let’s not forget that over the Howard years company taxes moved from approximately one-third of the income to about one-half. This is an important reason why personal taxes as a share of revenue dropped.

    Paying off the debt will come from a number of sources – not just individuals.

  18. So true Dave55..remember the thing called the Clever Country (knowing that our manufacturing industries couldn’t compete with cheap 3rd world imports)..guess what it all happened, yet due to severe under-investment over the past decade+ nor did we become the clever country.

    From today’s Age: http://www.theage.com.au/opinion/clever-country-our-brightest-are-kept-dirt-poor-20090513-b3bz.html

  19. Quote from above link:

    In the last quarter of 2008, a significant group of Australians was living below the poverty line. For a single person, this meant living on less than $415.06 a week. These people were working full time — 40 hours a week, and probably much more. They received no employer superannuation and weren’t entitled to concessions or pensions.

    Who were they? Illegal migrant workers? Sweatshop employees unaware of their rights? No — they were some of Australia’s best and brightest minds: PhD students.

    The author of this is spot on re factual information with the exception of stating that PhD students are post graduates. Many PhD students especially in the area of science have to have an Honors Degree before being accepted into a PhD which is 4 years and not 3 as per the link.

    And the hours are correct, a minimum of 40hrs per week, but 60hrs is expected..and all for the sum of $400pw.

  20. Then why the enormous drop in revenue??? Neil of Sydney, on May 14th, 2009 at 4:36 pm

    China is NOT our biggest trading partner – Japan is, and its suffering deflation (that leads to depression)

    Let’s not forget that over the Howard years company taxes moved from approximately one-third of the income to about one-half.Nature 5, on May 14th, 2009 at 5:43 pm

    *

    BS – Corporates are flat out paying 20% tax to any government – if companies paid 50% tax on income they’d all shut down!

    Individuals pay top rate of 45.6% (and that’s rare!)

    …and who do you buggers think paid off the debt after the Great War and WWII, The Korean War, Vietnam, The Ist Gulf War and the Second Gulf War, Iraq(?) and now Afghanistan – see a pattern here? Now go back and check the politicians from WWII – Liberal/Conservative/Republican – who went to war rather than negotiated – who reduced government regulation rather than share with the community…

    Greed and irresponsibility…

    ++++++++++++++++++++++++++++
    I will live in a society rather than survive in an economy!

  21. TB

    I think N5 meant that companies now made up 50% of government revenue, not that they were paying 50% tax.

  22. N5 & TB – this should show the facts:
    http://www.taxpolicycenter.org/briefing-book/background/numbers/revenue.cfm

    Individual income taxes and payroll taxes now account for four out of every five federal revenue dollars. Corporate income taxes contribute another 12 percent. Excise taxes, estate and gift taxes, customs duties, and miscellaneous receipts (earnings of the Federal Reserve System and various fees and charges) make up the balance.

    Figure 2 on that site tells the story succinctly…

  23. Sorry, the above is for the US – doh 😳

  24. May I just say God Bless Kevin Rudd.

  25. Min waves to TB. I am on my alternative computer, she who normally resides in the bottom of the linen press and so I don’t have your email address.

  26. May I just say God Bless Kevin Rudd.

    Yes you may Stephan. And you did.

    🙂

  27. Bacchus,

    This was interesting from your link:

    – Income taxes levied on individuals rose by $8,273 million (6.9%).
    – Income taxes levied on enterprises rose by $10,869 million (16.1%) due largely to a $6,530 million (10.9%) increase in company income tax.
    – Income taxes paid by superannuation funds also increased by $4,339 million (57.3%).

    And we wonder where the fall in revenue might come from.

  28. I read somewhere that $15B has been factored in the future estimates from auctioning off ETS permits!

    It’s all about revenue, not saving the world from global warming!

  29. joni, on May 14th, 2009 at 6:37 pm Said

    I think N5 meant that companies now made up 50% of government revenue, not that they were paying 50% tax.

    Basically yes. But this is a movable feast as the Graph on this link demonstrates. Scroll about half way down the page, http://www.aph.gov.au/budget/2009-10/content/bp1/html/bp1_bst5-03.htm

    Note that projected receipts from individuals are down about 11%; companies down about 18%; CGT down about 8%; GST down about 6% and other projected receipts down about 3%.. And this is just the projected figures fro the next 12 months,

    Sorry TB, I should have been clearer.

    text

  30. TB,

    Now go back and check the politicians from WWII – Liberal/Conservative/Republican – who went to war rather than negotiated

    I’ve just done some quick research and, yes, Chamberlain was a conservative, but far from being a warmonger, he is best known for Appeasement.

    I also found find this Prelude to War informative.

    (BTW, the American President was FDR, a Democrat, and Australia’s Prime Minister was Robert Menzies of the conservative United Australia party.)

  31. All shadowy members of the VRWC at heart though Tony.

  32. Nature 5

    I had a look at the graphs. it is still a little strange that revenue is predicted to fall so much. I think i will stick to the obvious reason.

    It is the new elephant in the room. It is what you would expect when you elect the ALP

  33. Yes joni – some interesting figures on those pages – thankfully the budget has reversed some of the funding cuts to the ABS from last year:

    Australian Bureau of Statistics — statistical capacity

    The Government will provide $60.0 million over four years to maintain the statistical capacity of the Australian Bureau of Statistics. The funding will support the scope and quality of statistical outputs over the forward years.

  34. Neil of Sydney, on May 14th, 2009 at 7:21 pm Said

    I think i will stick to the obvious reason.

    Pay tell. What is this obvious reason? And does this obvious reason apply to the Murdoch empire? BHP? Or indeed almost any entity on the planet?

    text

  35. Don’t bother, N5. Neil has never been one to let a few troublesome facts get in the way of his pre-conceived ideas.

  36. jane, on May 14th, 2009 at 9:00 pm Said:

    Neil has never been one to let a few troublesome facts get in the way of his pre-conceived ideas.

    Jane, he is not alone. While we all confront and create a reality from ideological points of view (and that’s unavoidable), some of us are prepared to have a rethink when our position is just ‘ridiculous’.

    I live in hope that Neil et al will, one day, have an existential moment. Or to put it more simply – the penny might drop.

    text

  37. BTW Neil you might want to identify who made these statements:

    Over the past months, as the global economy has been in decline, the state has been hit by large downward revisions to projected taxation revenue, GST grants from the commonwealth and mining royalties

    Further:

    Since the mid-year review, the budget has lost a massive $4 billion in forecast revenue from these sources

    And then there’s this:

    Since the mid-year review, the budget has lost a massive $4 billion in forecast revenue from these sources

    And then there’s this

    forecasts predicted growth would fall into negative territory in 2009/10, with unemployment expected to peak, and business investment to fall by 17.5 per cent.

    Now Neil make a guess. Another Treasurer mugged by a ‘reality’. Lol

  38. Well it was partly said tongue in cheek. But Labor does have a track record of debt and unemployment. Last time in power they racked up the highest federal debt in Australian history and the highest state debt in australian history in Victoria.

    I think the Libs would say that Keating made the recession he faced worse than what it should have been. I think they are saying the same thing now about the GFC.

    As far as I know our exports are still good if not booming. We have actually had a couple of very good trade surpluses recently.

  39. Two quick observations:

    1. For Neil, the GFC started as a ‘credit crunch’ and persists as a ‘credit crunch’; the implications of that I leave to Neil to figure out;
    2. The stimulus wasn’t meant to be just a domestic thing, and was meant to be part of a quasi-coordinated global thing to keep all of the global system from seizing up; the Australian deficit is just part of a series of stimuli globally (and that understanding is arguably a reason for why the Coalition response is light on detailed difference or alternative solutions, and heavy on nudge, wink, and hyped fear).

  40. Tony

    *Chamberlain was a conservative*

    Guess who declared war on Germany in September 1939…and I did say after WWII…
    +++++++++++++++++++++++++++

    N5 – re 50% – understand (see, we all do it)
    +++++++++++++++++++++++++++

    Min, will sort out next week – see below – still transferring files onto new computers…
    +++++++++++++++++++++++++++

    Off camping at Wivenhoe Dam for the weekend…catch you all next week…

  41. (neil) But Labor does have a track record of debt and unemployment.

    Why John Howard never made the cover of Euromoney:

    …They show that John Howard is the only treasurer in Australia’s history who’s been able to engineer – simultaneously – double-digit inflation (December 1981 to June 1983), double-digit levels of unemployment (April to October 1983) and double-digit interest rates (November 1980 to October 1983)…

  42. Kittlitter

    I have heard this many times. The point I was trying to make was that Keating made the recession he faced worse than it should be as the Libs are now saying about Rudd

    This from Wikipedia about the recession that Howard faced
    “The early 1980s recession was a severe recession in the United States which began in July 1981 and ended in November 1982.[1][2] The primary cause of the recession was a contractionary monetary policy established by the Federal Reserve System to control high inflation”

    and “A combination of deficit spending (citation needed) and the lowering of interest rates slowly led to economic recovery. From a high of 10.8% in December 1982, unemployment gradually improved until it fell to 7.2% on Election Day in 1984.[5] Nearly two million people left the unemployment rolls.[31] Inflation fell from 10.3% in 1981 to 3.2% in 1983.”

    If the US had double digit unemployment and inflation in the 1980’s chances are we would to.

    By contrast Keating had 28 months of double digit unemployment, the budget deficit blew out, he sold off Qantas and the CB and used the money to pay salaries and expenses.

    And the recession he faced wasn’t that bad. The US never reached double digit unemployment during Keatings recession but we had 28 months.

    Furthermore during keatings recession the state of victoria nearly went bankrupt.

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