Page 527 - Week 02 - Tuesday, 10 February 2009
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And this is the problem. We do not have enough detail to make a judgement on this. It is easy enough to say, “We need it, it’s urgent, it will stimulate the economy.” But the question is: will it? We have only to look at some of the commentary this morning. An article in the Canberra Times by Danielle Cronin and James Massola states:
Leading economists have criticised the $42 billion mini-budget to stave-off recession, arguing bringing forward tax cuts or calling a pay roll tax “holiday” are more effective than cash handouts.
RMIT economist Professor Sinclair Davidson said the Government should consider a “GST holiday” or pay roll tax relief, which would offer more “bang for the buck” than cash handouts.
Professor Davidson goes on to say, I think rather sarcastically:
“Do we believe that Australians have not been borrowing and spending enough on alcohol, pokies and tobacco, and that there aren’t enough plasma televisions around?”
And then you go to somebody like a professor from the ANU, Warwick McKibbin, who is also on the board of the Reserve Bank, who said in the article that—and I quote:
… the Government should temporarily reduce the GST rate or bring forward tax cuts in response to the global financial crisis.
“A cash payment … only has the potential to temporarily stimulate demand and has no long-run benefits to the economy.”
I say this again:
“A cash payment … only has the potential to temporarily stimulate demand and has no long-run benefits to the economy,” according to Professor McKibbin who believes the $42 billion-package was too large.
Indeed, the article states that Paul Drum, the policy director of Certified Practising Accountants Australia—and I quote:
… believed tax cuts were the most effective method to stimulate the economy.
“There is a school of thought that many tax cuts are spent by taxpayers long before they even receive the money, and therefore this would directly and immediately stimulate consumption.”
And this is the problem. We have a package from the government, and they have said this is the package. We have evidence that suggests that the government did not even consider many of these options. The article refers to Ken Henry, the Treasury secretary, in the following terms:
In evidence to the committee—
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