The notion that public debt is always bad, is one that any serious economist would dismiss as naive. For all the mistakes such as insulation and so on, the stimulus package was just what the economy needed. Indeed our economy, and tiny debt, is the envy of the world as a percentage of GDP. The reforms of the previous two decades helped of course but the stimulus was an integral part of Australia dodging a bullet when the rest of the developed world when to fiscal hell in a basket.
The overwhelming majority of a deficit is attributable to a reduction in tax receipts. The stimulus was estimated to contribute about 2% to both employment and growth, regardless of the 5-6% inefficiency in the schools program, as detailed in the recent report. In dollars and cents, that translates to about 200,000 people not having to receive welfare and more importantly, still paying tax. A staggering amount of money. Having it repaid by 2013 will be largely attributable to tax income increasing with growth.
By way of comparison, New Zealand had been running surpluses for nearly a decade, and were reluctant to stimulate their economy nearly to the same extent or as quickly as Australia. They went bang into recession and are predicted to be in deficit at least until 2016.
Simple really. Save in the good times and spend on infrastructure in a downturn, . Economics 101.
We have low inflation, low unemployment and interest rates around the L/T norm. Can't complain about that.
Although some argue that resources saved the day, this sector had some of the largest job losses during the GFC and also was the source of so much of the decline in revenue, so the notion is bit of a furphy. I guess this also shows the importance of keeping the sctor competitive, tax wise, just as a by the by.
Peter
P.S. Having said all that, no doubt if the coalition had been in government, they would be chest beating about the same stuff and Labor would be going on about the "reckless spending","wastage" etc.. Both sides understand the reality of this and are just playing politics with peoples' lack of economic knowledge.
