Australian Lefty on Politics, Governance, Science and Info Management

Great submissions to Stimulus Inquiry

Posted by Dave Bath on 2009-02-09

There are some great submissions to the "Stimulus Inquiry" by some heavy hitters and well-known names, including (in a private capacity) a Reserve Bank Board member and Saul Eslake, Chief Economist of ANZ.

There are also emerging themes across submissions, including skepticism about the desirability of one-off payments and taxcuts when compared to the more effective direct government spending, as well as the concern about the most vulnerable people in the community (those on benefits and allowances) not being protected.

Highlights and pointers to other great submissions over the fold:

What is gratifying to me is that some of these heavy-hitters have made comments that I’ve made before here: makes me feel like I’m not a complete idiot.

On giveaways and tax cuts versus direct government spending where people will save not spend:

[Saul Eslake]: there is no compelling reason to believe that people will regard any tax cuts … as being permanent… Hence the most effective fiscal policy response in the current unusual circumstances is likely to take the form of increased government spending.

[Prof J Taylor]: The theory behind the temporary rebate payments is that they would increase the demand for consumption, stimulate aggregate demand, and thereby get the economy growing again. What were the results? Did they work as the theory predicted? Figure 2 tells the story in a very straightforward way.

Temporary giveaways show no real effect on consumption

Effect of giveaways v consumption

[Prof McKibbin – RBA board member]: … a dollar of government spending has more stimulus in the short run, than direct cash payments to individuals or tax reductions, because a dollar of spending impacts directly on the economy, whereas a dollar of tax cut or cash payment will be partly spent and partly saved by household. To the extent that the payment is saved, this will reduce the short run demand impact. A dollar spent on infrastructure is a short run demand stimulus, as well as providing the required capacity in the economy to respond on the supply side once the economic slowdown has passed…  It is therefore problematic to have such a large part of the stimulus package, made up of cash payments to people rather than direct spending and rather than investing that money in future capacity building for the overall economy… The main problem I see is in the cash payments… My own personal view is that this package would be better focused and of a more suitable size if the transfer payments to individuals was eliminated from the Bills.

Cynicism on timings:

[Cynicism about spending timings by Saul Eslake]: the Government does seem to be unduly focussed on timing major cash handouts so as to minimize the likelihood of consecutive quarters of negative real GDP growth and hence what media commentators, much more so than economists, refer to as a ‘technical recession’ (I have described this elsewhere as the ‘Technical Recession Avoidance Program’ or TRAP).  The current set of proposals may well succeed in this aim, but to me the objective seems rather spurious;

Targetting criticisms:

[Saul Eslake]: Some of it will go to quite affluent households (including to second income earners in such households) who are more likely to save it than spend it;

Criticism of type of infrastructure:

[Saul Eslake]: it’s not clear, for example, that giving every school in the country the opportunity to upgrade or acquire halls, laboratories and libraries (though there are undoubtedly many which are sorely needed) provides the best means of boosting productivity over the long term, or of addressing other long-term challenges such as climate change or altering patterns of water use.

Saul Eslake’s is a beauty – especially his comments about some types of "stimulus" being nothing but a "Technical Recession Avoidance Program (TRAP)".

The only thing I mentioned in my submission not noted in any of the submissions I’ve read is the governance problem of blegabucks of infrastructure spending going through incompetent state premiers.

I’d also recommend Submission 13 from Mr D. White – it’s in point form, easy to read, short and punchy.  I pretty much agree with everything he has said.  I wish I’d written it.

See Also/Notes:


6 Responses to “Great submissions to Stimulus Inquiry”

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  2. I have received one complaint that the Senate FPA inquiry into the second stimulus package has not listed on its webpage all submissions received to date and, the possibility raised that senators might not have seen all submissions.
    Have you heard similar?

  3. Dave Bath said

    “Late” submissions have been published before, even if received some time after they closed. See the blockquote in this (2007-07-07) in reference to the Content Services Bill, where submissions were published that were received 10 days after submissions were supposed to close, and nearly a month after the bill was referred to committee.

    That said, I’d imagine the administrative staff for that inquiry were rushed off their feet in the last couple of days! The submissions sent over the weekend should at least have been printed out for senators meeting on the issue.

    I’ll also note that (for me at least, apart from the state premier governance problem) my points were better made by much more qualified people as noted above.

    Another six submissions were published today after Saul Eslake’s, which was the last one published by Saturday, so I know the poor folk doing the grunt work are hard at it. (The weird font on the last one at the moment gives more credence to the idea that the poor assistants are overloaded with work).

    My guess is that Judith Melville is one of your friends, so she can rest easy.

    I think we’ll both be keeping an eye on new publications. I sent mine in as a PDF so that publication should be relatively easy… the only stickler being whether they want to exclude mine because of my politically inconvenient statements about premiers – although they were much more measured than I feel, and thus the submission should not be excluded.

  4. […] Posts Christian cleric incites terrorism: prosecute him!Great submissions to Stimulus InquiryNature on bushfire probability in SE OzPhone-in and blog launched by Oz Law Reform CommissionCarbon […]

  5. Dave Bath said


    Just followed up why my submission is still unpublished. It appears that has lost some email… even when I give the Message-ID from the header.

    They say they didn’t receive it, I can prove that google got it (by the message id), and that my addressing is correct.

    This is serious. We should all follow this up and complain.

  6. […] dog eats email this timeDave Bath on Parliamentary dog gets a stern chatDave Bath on Great submissions to Stimulus Inquiryzombinol on Parliamentary dog gets a stern chatDave Bath on Valentine: 4th July, Al Capone, and […]

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