UPDATE: This post was originally called “Newspoll minus three days”, but has been changed after Roy Morgan broke their normal fortnightly pattern by issuing results from last weekend’s face-to-face polling (i.e. before the stimulus package was announced). From a sample of 853, it shows Labor’s two-party lead down from 59.5-40.5 to 56-44. Labor’s primary vote is down four points to 46.5 per cent, the Coalition is up two to 38 per cent and the Greens are up half a point to 8 per cent.
The excitement of the past few days has quickly overloaded Tuesday’s thread, while adding real interest to the next set of opinion polls. Unless ACNielsen and Galaxy have something planned over the weekend, the next ones up are the regular Monday double of weekly Essential Research and fortnightly Newspoll. John Hewson tells Crikey he’s expecting an election later this year, presumably a double dissolution:
You’d have to think that the odds are narrowing on the possibility of an early election, towards the end of this year. At best, the Rudd Government’s second stimulatory package will just buy some time – simply delay the inevitable. As long as the global recession continues to deepen and, as a consequence, China’s growth continues to stall, the best Rudd can hope for is to hold up consumer spending by the cash handouts sufficient to avoid a technical recession – namely, two consecutive quarters of negative growth … Moreover, the ETS is to be introduced next year with all the scaremongering opportunities that carries for the major polluters. So why not go the people for a “mandate” to continue with the strategy, especially now that Turnbull has so clearly nailed his colours to the mast, becoming such a fixed target, from both outside and within?
Of course, there’s much here that might be contested, not to mention the lack of a double dissolution trigger at this stage. In brief:
• Possum dissects the electoral impact of the stimulus package here and here.
• Antony Green analyses the finalised federal redistribution boundaries for Western Australia.
• The Senate has amended legislation abolishing tax deductible political donations, which will instead be limited to donations from individuals rather than companies. Deductions applied for donations of up to $100 from individuals before the Howard government’s 2006 “reforms” jacked it up to $1500 and extended it to companies. The legislation as amended maintains the $1500 threshold.
1) There are already tax cuts legislated that come into effect on July 1st
2) Tax cuts don’t stimulate the economy as quickly as immediate one off lump sum payments
Sorry have to pick up on you again, short term payment have little or no long term stimulus effect, because once it is gone, there is little (apart from fiscal churn) that helps the economy. You might delay people getting laid off, but they might get laid off after the next election.
It is also debatable whether a government spending is quicker then a tax cut, the stimulus payment are from taxes paid previously or from borrowing. If we wait for the government to collect the taxes (can be 9 month after the wage/profit earned) and then give a stimulus package. It can be delay up to 9 month from the time wages is earned, if we give tax cut, we saves 9 months.
We don’t NEED a stimulus package that only starts fully working 3,4, or 5 years from now, because our economy, and the world economy will probably be growing strongly by then. We need a stimulus package that has its greatest effect within the next 18 months.
A tax cut can start from Jan 1 2009 per Malcolm Campbell’s model, ie we receive additional money on our next pay (ie money received quicker then the stimulus payment.) additionally since it is a permanent cut, it will increase long term spending and won’t delay unemployment, it will stop unemployment
He is actually doing BOTH, tax cuts and one off payments (read your own copypasta).
No read it again …. for people who do not get the tax cut, ie pensioners who do not lodge or pay tax, he will not leave them out and give them the same tax cut. Anyone who can receive tax cut gets tax cut and no additional payment
21 – We already have tax cuts coming up.
So dovif
Do the tax cuts equal the one off payments or are they just bringing forward the already legislated ones?
dovif at #48
“.. but since people who are on low income pay less tax …”
Do they?
Is that true?
Counting all forms of taxation [including the regressive GST] do lower income people pay a lower percentage of that income as tax compared to higher income people?
No 53
The issue is not whether they are one off or not. The point is that the best long term strategy to promote growth is to cut taxes. Let people keep more of their own money rather than giving it back to them in grants. Over 40% of taxpayers pay no net tax thanks to inefficient churn.
The mantra of tax cuts is burned into the brain like religious dogma.
Despite logic, reason and common sense it is still seen as literal truth.
I was just trying to ascertain the quatum of the tax cuts dovif was suggesting. Should it just be personal tax or should small business taxes be lowered as well?
No 54
He means paying less tax in dollar terms. If you only earn $30,000 it’s a mathematical certainty that you’ll get less of a tax cut then someone earning $500,000 by virtue of our progressive income tax system.
No 56
The $42 billion package is unaffordable, reckless and is of dubious value to the economy. That smacks of illogic and stupidity, not common sense, zombie.
So spending money on schools and the homeless is bad eh?
tsk tsk noorty government.
No 57
A mixture of both income and company tax cuts would help grow demand and supply. The problem is that the government always contextualises such cuts with the backdrop of permanent reductions in government revenue. Well that’s obvious – but it’s not a problem if you co-ordinate those tax cuts with commensurate reductions in wasteful welfare spending.
No 60
Yeah, it would be nice if the package was limited to schools and homeless people, but it’s not. Instead, we have an additional $15 billion in handouts which only delay the inevitable.
[Well that’s obvious – but it’s not a problem if you co-ordinate those tax cuts with commensurate reductions in wasteful welfare spending.]
eerr wouldn’t that mean they cancel each other out, ie no stimulus?
Wasn’t it Nick Minchin who said something like $10 billion is such a small amount that Cabinet should not even bother discussing it?
GP @ 56
Name 2 respected economists who support your statement.
Apparently Fielding cares about the unemployed, which is good, because his blocking this package will mean there are more of them for him to care about…
http://www.abc.net.au/news/
Re: 65
Steve
careful, you are starting to sound like Andrew Bolt.
😀
No 63
I’m talking about long term Grog. Over 40% of taxpayers pay zero net tax because of the various benefits to which they’re entitled. If you let these people keep more of their income, then the handouts are unnecessary and the burden on the nation’s finances is significantly less over the long term. Only a government in favour of increasing its own size worries about permanent reductions in revenue.
No 65
Steve K, do your own research.
And here is how Ch 7 Perth reported the stimulus last night – note it’s the second story. They highlighted Kevin & Julia not being there for the vote.
http://www.westtv.com.au/?vxSiteId=43c6a3c7-abf1-4c32-b98d-c27f8fa83360&vxChannel=News&vxClipId=1416_WAU2077&vxBitrate=300
zombie mao, I don’t read Bolt so I don’t know what you mean.
GP:
It should have been cut during boom times. And I hope they will be cut when the boom returns (or at least normalacy). Cutting it now will sentence us to a deeper recession.
GP, Can’t name even one eh?
I’ve done my research and I can find one either.
No 66
The Government is playing up the prospect of unemployment as if it will be a permanent fixture to our economy if we don’t spend ourselves out of fashion. Recessions always produce unemployment and most of the time it is temporary.
Well I choose less unemployement for a shorter time than whatever the market would otherwise determine there should be.
No 73
Milton Friedman, Thomas Sowell. I can name more but it doesn’t matter because you’ll discount them as extremists due to your obvious partisanship.
GP
Can you tell me the quantum of the tax cuts you are advocating?
Correction to 73
I’ve done my research and I can’t find one either.
Pretty sad position to be in GP – all alone with only Turnbull and Bishop to keep you company.
No 75
Why is that outcome worth saddling future generations with $200 billion of debt?
[Why is that outcome worth saddling future generations with $200 billion of debt?]
Can you explain how you arrive at the $200 billion figure?
GP, When did Milton Friedman comment on the Rudd stimulus package? Remember, you said that the 42B was too much and I asked for 2 names. Come on, tell us the names of 2 respected economists who have said that the 42B is too much? Better still tell us the names of some business leaders and heads of major organisation who have said that 42B is too much.
No 80
My apologies, that should read $118 billion.
The $200 billion figure is taken from the Government’s intention, as part of its latest package, to increase its maximum allowed debt.
No 81
Groupthink does not equal fact Steve K. Perhaps you should read more broadly.
[GP, When did Milton Friedman comment on the Rudd stimulus package? Remember, you said that the 42B was too much and I asked for 2 names. Come on, tell us the names of 2 respected economists who have said that the 42B is too much? Better still tell us the names of some business leaders and heads of major organisation who have said that 42B is too much.]
I believe one of the Board Members of the Reserve Bank has said as much. sorry no link, was in the Dead Tree verswion of The West.
83
You can’t name even one. Pathetic position to be in when you’re playing the economic expert.
[Better still tell us the names of some business leaders and heads of major organisation who have said that 42B is too much.]
Come off it Steve, there’s um, er, hmm …..
Oh and I’ve found one other.
[Professor Neal Stoughton is head of Banking and Finance at the Australian School of Business at the University of New South Wales.
He has served on the faculties of UCLA, the University of California at Irvine, the University of British Columbia and the Thunderbird School of Global Management at the University of Vienna.
He says 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 told the ABC’s economics correspondent Stephen Long.
When asked what chance the stimulus package had of keeping Australia’s economy out of recession, Professor Stoughton said he was pessimistic.
“I don’t think there’s any chance that it’s going to have much of an impact,” he said.
“Australia is a country that is hugely affected by external wealth forces more so than the United States of course, and while stimulus within a country such as the United States might actually attempt to prop up consumer demand, here we’re going to need to see demand in other countries such as China, Japan and the United States be bolstered.”]
http://www.abc.net.au/news/stories/2009/02/05/2483688.htm
[Why is that outcome worth saddling future generations with $200 billion of debt?]
Because that debt would be easily managed and paid off. Australia’s credit rating (as much as those Standard and Poor’s guy are worth anything) would not be changed.
And it would mean less people would be unemployed for less time.
What do you think the end of government economic policy is? Keeping Australian govt debt free? A deficit or surplus is not an end. The govt is not a company, the point is not to just make as big a surplus as possible. Surplus is not profit
Thank you GP for admitting your error. It is understandable because it is being quoted by many in the Liberal Party. 🙁
No 77
Fast forwarding the scheduled tax cuts would be sufficient until more data is gathered. I am not the least bit sure why Rudd is so intent to rush his spending – it can only be a political imperative to ensure that the media and citizenry is in a constant state of crisis awareness.
Which is sad. Our economy is still, fundamentally, in good shape despite a downturn in confidence.
Gary, I though GP was going to suggest Gerry Harvey 😉
GP
So all the companies sacking people are just doing it because of confidence?
Treasury chief warns Opposition’s “plan” would likely send economy into reverse …
http://www.theage.com.au/national/turnbull-plan-risk-to-growth-20090205-7yzf.html?page=-1
The Australian economy would be at greater risk of going backwards under the alternative rescue package proposed by Opposition Leader Malcolm Turnbull, according to the nation’s chief economic adviser.
In a blow to Mr Turnbull, Treasury Secretary Ken Henry last night said that a smaller stimulus package than the $42 billion plan proposed by the Federal Government would increase the prospect of the economy stalling.
…
Mr Turnbull has proposed a smaller package of about $20 billion, including tax cuts
…
Asked by Greens Senator Bob Brown what would happen if the package was half the size, Dr Henry said: “There would be greater risk of negative growth at some point.”]
The Age, 6 February 2009
[I am not the least bit sure why Rudd is so intent to rush his spending – it can only be a political imperative to ensure that the media and citizenry is in a constant state of crisis awareness. ]
Probably because hew can see the iceberg coming and think he might as well try and turn the ship rather than hit it head on…
If a Stimulus package is required and the consense among Australian business, economists the IMF, Treasury and so for is that it is and that it is urgent the the point of it is to replace sharp falls in demand so that jobs are not lost.
Tax cuts do very little of worth in the immediate term to replace lost demand. $15 a week will not encourage great numbers of people to go out and spend $500 here and there. In fact it would do nothing to help in the short term. Jobs will be lost, the tax base shrunk, there will be an increase in unemployment benefits and the amount recovered from the tax base even lower, because of tax cuts.
In the current environement tax cuts could actually harm the economy, they would have very little beneficial effect in the short term which is where the crisis is.
There is an asteroid close by, we need to dosh out a bunch of cash to build a shelter right now, not put away $15 a week to have enough to build one in the future.
But for the conservative purists it is dogma that tax cuts are the only allowable answer to any problem or non problem, regardless. It is disturbing that the tax cuts only crowd don’t mind allowing thousands to be put out of work for the sake of their feelings of purity.
Againg it should be pointed out that an economy recovers much faster if jobs are saved rather than having to create new for those unemployed. A business at a certain break even turnover might keep their staff on but a person will not start up a new business at that same turnover, wanting of course to make a profit. Business investor waits longer for a higher available turnover to start their business. Saving jobs is thus of utmost importance.
The package is designed to provide the short term demand replacement for long enough, when infrastructure projects can cause a replacement demand. The purpose is to keep businesses alive, people in employment and thus when the Global economy begins some sort of recovery Australia is able to benefit Immediately. This would not be the case with higer unemployement and lost businesses.
No 88
[What do you think the end of government economic policy is? Keeping Australian govt debt free? A deficit or surplus is not an end. The govt is not a company, the point is not to just make as big a surplus as possible.]
I’m not advocating that the sole purpose of government is to run massive surpluses. That would be tantamount to hoarding, in which case the surplus should either be invested in real, tangible infrastructure or returned to the people.
[Because that debt would be easily managed and paid off.]
How do you know? We only have Government forecasts to rely upon and they have been notoriously unreliable. We cannot pretend to predict the circumstances in 10 years time let alone six months given the volatile nature of the global economy presently.
The only reason why Australia returned to fiscal prudence was due to hard, but necessary, cuts to government expenditure and sale of government assets. Contrary to the opinions of Keynesians, it is not easy to return the budget to balance – it took the Coalition 10 years to eliminate government debt even in the best global economic environment.
No 92
Lower confidence = lower demand = higher unemployment.
[We cannot pretend to predict the circumstances in 10 years time let alone six months given the volatile nature of the global economy presently. ]
oh geez, you’re getting close to the “we can’t predict what the weather will be in a month, so therefore climate change is fake” argument. We can look at trend data, and know that in the long term growth will return to trend, but that doesn’t mean we need to let the short term dip be as deep as it could be
[The only reason why Australia returned to fiscal prudence was due to hard, but necessary, cuts to government expenditure and sale of government assets.]
Well thanks to Howard and Costello there is a lot of fat to cut in the budget
[it took the Coalition 10 years to eliminate government debt.]
How long did it take to return the budget to surplus?
Would Government debt have been retired earlier if Costello did not put the Budget into defecit?
Imagine where the Liberals would be going right now with SerfChoices if they’d won the election. Wages getting cut, mass lay-offs. Consumer confidence taking a belting, flowing in to lower business confidence and more paycuts and lay-offs.