the senate and the treasury advice

ABC Online...
Treasury Secretary Ken Henry has told a Senate committee he has been urging the Federal Government to act quickly to stimulate the economy.

Dr Henry is being questioned by Opposition and crossbench senators about the Government's $42 billion spending package.

The package - which includes $12 billion of cash handouts and $30 billion in infrastructure spending - is in front of the Senate inquiry after the Opposition joined with the Greens, Family First and Independent Senator Nick Xenophon to block its immediate passage through the Senate.

Dr Henry says the sooner Australia acts to stimulate the economy the better off it will be.

"Given the very rapid reduction in forecasts for world growth and for our major trading partners we certainly have been saying to the Government there's a clear need to act now," he said.

"We have certainly put advice to Government that given that the macroeconomic circumstances confronting the Australian economy, there was a clear case and there is a clear case for a very substantial fiscal stimulus for that to be delivered to the Australian economy before unemployment starts to rise."


Previous stimulus worked

The Committee also heard there is evidence that the $10.5 billion spent late last year did stimulate the economy and create jobs.

The Federal Opposition has been questioning whether the previous plan worked.

But senior Treasury Official David Gruen has told the inquiry that the stimulus was effective.

"We do have evidence that the package did stimulate consumption and we have strong reason to believe that that would have led to more people being employed than would otherwise have been the case," he said.

Nationals Senate leader Barnaby Joyce has asked why the new package included money for ceiling insulation rather than other types of infrastructure.

"Would I get more bang for my buck out of a rail system bringing connectivity between ports to a higher level a new rail system or, I don't know let's think of something, ceiling insulation," he said.

Dr Henry told Senator Joyce the focus was on finding projects that can start immediately.

He says the rail infrastructure projects would take longer and not provide the economic stimulus quickly enough.

"If only one could find all of these highly capacity building infrastructure projects and turn the tap on now, everybody would do it, the difficulty is they don't exist," he said.

Liberal Senator Abetz quizzed the Treasury chief on when the documentation for the stimulus was finalised.

In a terse exchange of words, Dr Henry replied: "I think the best answer to that question, Senator, is that it went to the printer on Sunday."

"It went to the printer on Sunday. When did it come back from the printer?" Senator Abetz responded, to which Senator Henry replied, "Monday".


'Worse than useless'

A banking and finance academic has expressed serious doubt that the Government's stimulus package will avert a recession.

The head of banking and finance at the Australian School of Business, Professor Neal Stoughton, says the Australian economy is more dependent on external forces than economies like the United States.

He told ABC Radio's PM program that the stimulus package, as it stands, is worse than useless and cannot prevent a recession.

But he does not support the Opposition's call for tax cuts either.

"My issue is that I'm not sure that the Government has the best information on where it's most efficient to spend public funds, where it would be actually serving the best long-run interests of the Australian population," he said.

He says that while a stimulus package in the US will help prop up the economy, it will not work in Australia.

"Here we're going to need to see demand in other countries such as China, Japan and US be bolstered and so within Australia there's just not enough demand by the consumer sector to prevent a recession if it's going to happen."

Dave R.