Archive for February 5th, 2009

That would explain why they want to get the stimulus through so quickly

As much as I still think the Rudd government’s stimulus package is a good idea, albeit with a couple minor problems, after sitting in on a couple hours of senate proceedings today as they debated the bills which make up the stimulus package, I am left with a few points of contention.

It was clear from the moment that Kevin Rudd started going on about how any delay in passing the bills was an afront to the funding of schools, rather than an afront to our economic recovery, that Kevin was trying to produce better headlines than anything which could be unearthed by the parliament in a comprehensive review of the bills. Based on the sheer size of the stimulus package, which is the largest non-budget spend by the Australian Government in history, if there was nothing hiding in the pages of the bills then Kevin would have copped the delay on the chin, knowing that such complicated legislation deserves to be debated…a point his side of the parliament were keen to make when the Work Choices bill was passed in about two weeks.

Anyway, on with the points of contention.

It would appear that somewhere in these bills, the Rudd government plans on increasing the government’s maximum allowable debt from $75 billion to $200 billion. This isn’t to say that they will run out and spend up as soon as the bills go through, but the fact that they even want this extra allowable debt is a worry.

From my perspective, it either means that the Rudd government think things are going to get a whole lot worse despite their stimulus package, or they are planning a splurge in the next budget. Either way, a $200 billion dollar debt, regardless of how it is racked up, is just not acceptable. One of the reasons that we are in as good a position as we are when compared to the rest of the world, is that we have run federal budget surpluses for so long.

$200 billion is just not on. That bit of the bill needs to be removed before the stimulus is passed.

The coalition senators presented an interesting proposal to the senate. They believe that a better stimulus for small business than some of the incentives which have been put forward (the rebates for various expensive items, rebates which the businesses won’t see until July 1 or later, and which they can only get if they spend money now, at a time when their cash flow is poor and they probably can’t afford to spend the money) is having the federal government pay some of the superannuation contribution (I think they said two of the current nine percent compulsory super contribution which, to clarify, would mean 7% paid by employer and 2% paid by government) for businesses with 20 employees or less, for the next two years. Effectively this frees up money for the business to spend as it needs.

I agree with the idea, and it would certainly be more helpful than the nutty “rebates on computers which cost more than $2000” (if the public service were buying $2000+ desktop computers for desk jockeys I’d be furious at the waste of money…I don’t know why the government expects small business to waste money like that), although I still believe that the idea of reallocating the cash injections and small business incentives so that they become smaller cash injections for individuals as well as cash injections for small business would be a good idea. Perhaps we could reallocate the $3.9 billion “house insulation for all, so that we can cut greenhouse gas emissions” plan (which apparently won’t cut greenhouse emissions at all) in to the “superannuation contribution” fund.

The next things on my list are observations which aren’t about the proposal, but about the odd behaviour of Labor to date on this one.

Firstly, Kevin Rudd and Julia Gillard did not vote on the bill when it passed through the house of representatives at 5am. Sure, they’re busy people, but parliament sits for long hours when incredibly important legislation is being discussed. For the leader and deputy leader of the party which are vigorously supporting the bill to not stay and take part in the vote is an insult to the parliament and to the constituents (I was going to use the word “voters” but that could have been confusing in that context). It does make me wonder what they will do if the legislation doesn’t pass through the senate…will they try to wriggle out of trouble by saying that they “didn’t vote for it, and by the way here’s a smaller package which we’ve already shown to Malcolm who seems to like it”?

I’m also amazed that not a single Labor senator has put themself on the list of speakers for this bill. It could be a tactic whereby they just listen to the ideas of everyone else and then the party room make amendments based on these suggestions for senators to tack on to the bills, or it could be a simple case of “how dare you block our bill, and how dare you waste our time by rambling for days on end in parliament when we could have moved on to other topics”.

I’d suggest that it’s more likely to be the latter, although if the numbers start looking particularly dicey, then it may become the former for emergency purposes. It’s such a pity that Kevin has decided today to only listen to the minor parties (and even then, not act on their suggestions) though…especially when the coalition make up a lot more numbers than the minor parties, meaning that more people voted for, and are represented by, the coalition than the minor parties.

Ultimately though, I do still support the plan, although I would be happier with it if there were a few amendments.

If I’m not at work when the senate next debate the stimulus bills, then I intend on watching the senate webstream and “live blogging” as the debate rages.

Samuel

February 5th, 2009 at 10:31pm

Stimulus Take Two

I have now had some time to give Kevin Rudd’s latest stimulus package some thought and debate its merits and some of my opinions with a few people, and come to some conclusions.

On the whole, I think the stimulus package is good idea and it should work, but there are a couple things which I would change. The main thing which makes the plan a good one is that it throws money at the free market to enable it to do what it does best…decide where money needs to be spent in order to keep itself operating. It would appear to me that the idea behind the package is to make the economy tick over in much the same way that it would if these were normal circumstances.

The focus of the package is both on short term cash injections, and medium term job promotion.

I was very surprised to hear Kevin Rudd reintroduce the “education revolution” phrase with this stimulus package, but if this is what he meant by “education revolution” then I think the idea has merit, even if I wouldn’t personally call it an “education revolution”. Throwing money at schools, to spend on infrastructure is really a plan for the medium term. It basically gives money to schools to then give to private enterprise, so that they can then build various things, and employ labourers to do the work, which in turn assists the industries which supply the construction and maintenance industries by creating more demand for their products.

The same can be said for other infrastructure programs.

The short term cash injections come in the form of payments to individuals with many individuals set to receive $950. The government are asking people to spend that money, but as they are giving out cash payments (or, more likely, deposits in to taxpayers’ bank accounts) it is clear that they understand that not everyone will spend the money straight away, and they are fine with this. If they weren’t fine with it, then they would be giving everyone Visa Debit cards loaded with $950 and a one month time limit, after which the government gets the unused money back and spends it on other stuff.

Personally I won’t be spending the money straight away, simply because my circumstances dictate that my best use of the money is to kill off my existing debt (which I could do with the $950) which would then allow me to save money to put towards domestic travel. I haven’t been able to shake this debt for a very long time, so rather than blowing $950 on stuff that I don’t actually need right now and contending with this debt for the foreseeable future, I would be better off killing my debt now, and spending stimulus package number three (aka the end of financial year tax return) without keeping myself in a debt that I would still have to pay off.

This fits my circumstances, and probably doesn’t fit the circumstances of the majority of people. The bottom line on this is that the stimulus package is designed to support the free market economy, and in a free market, it is up to each individual to spend money as they see fit. Kevin Rudd quite rightly expects that most people will spend their stimulus package…most people will probably see it is a bit of welcome relief…I know that I do, but I probably have a different way of spending it.

I still fit within the spirit in which the money is given, as I am bringing forward the spending of money. Without the stimulus package, I would probably be saving until a bit after my tax return in order to wipe that debt. Instead I will be able to free up that money straight away, clearing a debt from my bank’s ledger, and allowing them to either have less debt, or to reallocate the funds which were leant to me.

The one thing which I do see as a significant problem is the bizarre incentives being given to small business to spend money, in the form of rebates. This doesn’t help NOW, and is hardly likely to make business spend money which they don’t currently have.

I was debating this point with a friend last night and they had the idea of scrapping the personal cash injections in favour of cash injections to small business, on the basis that 80% (a figure which I haven’t had a chance to verify, but sounds about right) of money is spent on business-to-business transactions, and the other 20% is consumer-to-business.

I don’t agree with scrapping the personal cash injections entirely, but what I would suggest is taking the large chunk of money which has been allocated to personal cash injections, combine it with the chunk of money which has been allocated to small business rebates, and split it between cash injections for personal citizens and small businesses. The only condition I would place on this is that the injections for small business would need to be under a time-limited scheme, where the money must be spent, probably within a two month period.

In this way, you would be attacking the slowdown on two fronts, the retail end, and the wholesale/B2B (business to business) end, which I think would be a more effective way of kicking the economy in to gear than only throwing money at the retail end in the short term.

I do have one other minor concern with the package, and that is that, due to the sheer size of it, it’s a one-off stimulus. This can not be repeated. It is therefore a gamble on taking the national budget in to debt, on the basis that whilst we tide ourselves over with a stimulus package, the rest of the world economy will start to recover. It’s a risk, but I think it is worth it. Even if the gamble fails, at least it will help to ensure that our economy doesn’t suffer anywhere near as badly as some overseas will and are.

On the very bright side, the main reason that I believe this will work, is that it flies in the face of Kevin Rudd’s summer holiday essay about ending capitalism. By its very nature, this stimulus package is supporting capitalism and the free market…it says “here’s some money, you know how best to spend it, go forth and do as you see fit”. It doesn’t have any of the bizarre “limit incomes because money shouldn’t go to the people who are in charge” directives that the Obama administration are supporting and is, on the whole, one of the best policies that I have seen from the Rudd government. It’s a tad rough around the edges, but so is every bit of legislation at first. A bit of massaging by the senate and it should be good, as long as the Greens don’t hijack it with their own “but Obama is doing this in the US, we should follow him” agenda.

And on that note, I’m off to Parliament House. There’s senate massaging to watch!

Samuel

February 5th, 2009 at 05:06pm

One does have to wonder what’s happened this time

I’ll admit that I was surprised when I noted that there was no rain falling in Sydney last night, because the signal 2CC were receiving via satellite certainly sounded like it was being interfered with by heavy rain. All of that wonderful half-intelligible audio and erroneous pulses…actually one of the erroneous pulses was quite interesting, I haven’t heard a weather update, the top of hour IDP and an ad break simultaneously before.

This was all between 7:30pm and 8:30pm, and by the time I checked in again after midnight, there was dead air. I had better things to do than leave a radio on to see when the next bit of sound might seep out of it, but I did check back every forty minutes or so, and as far as I can tell they returned to normal around 4am.

This does make me wonder what’s going on today. I didn’t hear any of the Steve Price show, but at the moment Tim Webster’s show appears to be being sourced from the 2UE webstream, and according to a media spy contributor, 2HD Newcastle were sourcing the Steve Price show from the 2UE webstream as well.

I suppose I should check 2AY this afternoon to see how the Derryn Hinch show sounds, because I’d be interested to find out if this is a localised issue or not. If the satellite feed is “wonky” on a national basis, then I wonder how Hamish and Andy will be distributed to the FM stations this afternoon?

Still, it’s all speculation at this stage, so I’ll go and have lunch, and then jot down my thoughts on Kevin Rudd’s stimulus package.

Update: Word has it that 2UE are having issues with the link from their studios to the Channel Nine tower which has the dish linking them to the network. In other words, I’d be wasting my time checking if the the 3AW or various FM Drive shows are having similar issues as they shouldn’t be affected…as long as they don’t use the same link from the heap of equipment at the UE building anyway. I might check for the fun of it! End Update

Samuel

2 comments February 5th, 2009 at 12:44pm


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