Warwick McKibbin’s comments on fiscal policy

From my recent Fin Column.

Recent articles in the Sydney Morning Herald and The Age – sister publications of the AFR – told us that Warwick McKibbin has concerns about the Labor government’s stimulus programs. As those newspapers say, McKibbin is a prominent economist: he is the executive director of the Australian National University’s centre of applied macroeconomic analysis. But what distinguishes him from other professors – and what makes McKibbin’s views noteworthy – is his second hat: for the last nine years, he has been a member of the board of the Reserve Bank. That position gives McKibbin access to Reserve Bank macroeconomic research and analysis. It also allows him to learn of any Treasury views which the secretary of Treasury, Ken Henry, might share with his fellow board members. Thus, when we read about McKibbin’s statements we do not judge them in the way we might assess musings from the score of other economics professors at ANU or the hundreds of economics professors at Australia’s 38 other universities.

One complaint McKibbin reportedly made about the government’s stimulus is that “It wasn’t evidence-based policy, they panicked”. Readers were not told how McKibbin came to this conclusion, but information available to the public – mainly through evidence provided to the Senate Estimates committee – does not support his view. Treasury was aware of economic literature about the effects of stimuli, although little analysis existed anywhere about the likely impacts of the global financial collapse. And reports praising Australia’s policies from the International Monetary Fund last November and from the Organisation for Economic Co-operation and Development in September give no comfort to McKibbin’s argument that the government’s spending package was the result of panic. The government had to act quickly to ensure confidence was not destroyed, but there is no evidence that it acted precipitously or extravagantly.

Indeed, McKibbin could have mounted an argument that the government responded too slowly.  In October 2008, a month after Lehman’s collapse, the government showed no willingness to use the budget to increase domestic demand, so worried was it about the political consequences of allowing a budget deficit. It was only in early 2009 that the government introduced programs to protect employment and even then unemployment increased. The Reserve Bank, on the other hand, started to unwind interest rates in September 2008. If the government acted irrationally by introducing spending programs in January 2009, McKibbin might think that the Reserve Bank acted hysterically by cutting interest rates in the previous year.

McKibbin is also unimpressed by some of the government’s spending package. “They put money into school buildings, they put it in insulation, they put it in stuff they could never reverse”, he was reported as saying. Some government programs involved rapid one-off spending by way of grants, some involved short-term taxation incentives and spending on insulation, some involved longer-term spending on infrastructure. None of these is reversible, although it is not clear what McKibbin means by that term. The government can, however, stop, reduce and postpone spending – as some argue it should because the programs have been more successful in stabilising employment than anyone could have reasonably contemplated. The government’s approach was pragmatic and practical, features which might not easily be present in what McKibbin calls a reversible program.

Another McKibbin gripe seems to be that he was not asked before “the government rammed those decisions through the economy even though they were fraught with risk. No one was consulted about an alternative view, and if you did say something you were attacked by the Treasurer and the Prime Minister in public.” Perhaps McKibbin believes his position at the Reserve Bank entitles him to provide advice to government before it finalises decisions. If so, he has a curious view of the workings of government.

But the major problem with McKibbin’s comments is that he necessarily allowed his position as a member of the Reserve Bank board to be used to air his views and, at the same time, he provides insufficient evidence to make those judgements credible. When you wear two hats simultaneously you have a presentation problem that needs careful management.

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32 Responses to Warwick McKibbin’s comments on fiscal policy

  1. observa says:

    My guess is McKibbin might put it like this. Suppose at the last election Kevin Rudd and Co had said- Oh by the way, if as seems likely a world recession hits we’ll turn around the 11mill aging workers of Oz savings from $20bill to a net deficit of $57bill, (namely $7000 per worker) and blow it on everything from solar panels, pink batts, school halls, opening up the mothballed detention centres again, etc before it becomes obvious we shouldn’t continue down that path any longer, they would have saved us and Kevin Rudd a lot of distress and angst. Sounds a pretty fair argument to me but McKibbin’s peers seem to think it’s all OK because the miners can foot the bill sort of.

  2. J says:

    And reports praising Australia’s policies from the International Monetary Fund last November and from the Organisation for Economic Co-operation and Development in September give no comfort to McKibbin’s argument that the government’s spending package was the result of panic.

    Interesting that you would even cite the IMF as an authority reference, Tony, because two months before Bear Stern’s collapse the IMF was saying the US economy was strong and looking to grow at a steady non-inflationary pace.

    I would be using the IMF very carefully.

    If the IMF’s econometric models are incapable of predicting a pretty serious recession (that still doesn’t appear resolved) a couple of months before the first wheel fell off, what criteria would provide you with enough comfort that the data input in the models would churn out accurate forecasts regarding the stimulus affects?

    For that matter you could also apply that same criteria to Treasury’s econometric models.

    Are the affects on long term defcits/long term interest rates also backed out to correctly value the net stimulus? No? Why not?

    When you wear two hats simultaneously you have a presentation problem that needs careful management.

    Would you also apply that to Ken Henry trying to sell a tax policy while giving advice to government on tax matters wearing two hats?

  3. observab says:

    there is plenty of evidence from McKibbin et al – eg see his testimony in 2009 at parliamentary committee – to show that the Australian fiscasl stimulus was too big, lacked in quality (halls rather than teachers, bats where they were not needed, cash to rich people etc etc) and lingers too long – as systemic risks eased from heightened levels in early 2009

    Kevin Rudd did not save the world from going into the great depression – quatitative/monetary easing, fiscal stimulus esp amongst the major players – and now the new Dep PM highlights the resources boom mark 11 (ie the GFC will prove to be a largely temporary/small shock to Oz). Australia is one of the few places in the world where household wealth has returned above pre GFC levels – can you name some others?

    the Northern hemisphere recession is well past albeit sustained and balanced global and the restoration of financial stability is likely to prove illusive

    you should also acknowledge that McKibbin’s comments about climate change policy – and in that regard he is also a global expert and banging on about the need for a pricing mechanism for a long time…his modelling goes back almost 2 decades on this!!

    and fortunately, the new PM is hopefully going to move that way rather than the tax route!

  4. john armour says:

    If Rudd hadn’t “panicked” and doubled the size of the initial stimulus package we’d certainly know what real distress and angst feels like.

    I’ll bet the punters in retail, services, construction etc who kept their jobs think it was money well-spent. And soon it will be “re-paid” (and not by the MRRT which is revenue neutral). The destructive effects of 9 or 10 % unemployment however would’ve been with us for years.

    At what point do you think “it becomes obvious we shouldn’t continue down that path any longer” ? May I suggest that you keep a close watch on those European states that are about to embark on fiscal austerity measures for some clues.

  5. observa says:

    However Mckibbin’s use of the word ‘panicked’ to describe a Labor Govt giving in too readily to their natural proclivities is somewhat mischevious of him, whatever lack of any real evidence they actually have for displaying such typical political weakness-

  6. observab says:

    the gfc did elict panick from lots of people – not just politicians – the test in the national interest is to stress test ahead of shocks and to recognise and correct any mistakes as soon as possible to minimise the costs

    politicians/humans panick and find it difficult to say they could have done better and even harder to say they were wrong!

  7. Harry May says:

    “…… the programs have been more successful in stabilising employment than anyone could have reasonably contemplated.”

    A wrong and fundamentally ludicrous proposition. Deficit spending throws people out of work.

  8. Butterfield, Bloomfiled & Bishop says:

    I haven’t read anywhere how much of the stimulus McKibbin wanted cut so we know how much stimulus was warranted.
    do we know?

  9. observab says:


    try this ……”The best representation of the crisis may be one where initial long-lasting pessimism about risk is unexpectedly revised to a more moderate scenario. This suggests a rapid recovery in countries not experiencing a balance sheet adjustment problem.”

  10. Tel says:

    The following may be considered by many to be meandering and off topic, but I actually consider it more on topic than the article itself, because it better explains why infrastructure investment is kind of foobar in this country, and what makes it difficult to achieve anything.

    I’m looking at buying a hot water system (because it’s more fun than a cold shower every day) and I’m going to oversimplify the quotes to make a neat little economics puzzle. You can buy:

    * Equipment that lasts 5 years, for $1000 (small anode, thinly enameled mild steel tank).

    * Equipment that lasts 10 years, for $2000 (big anode, properly enameled mild steel tank).

    * Equipment that lasts 20 years, for $4000 (stainless steel tank).

    None of these are solar by the way (costs you an arm and a leg) but that’s beside the point — presume that all running costs are equal so that in all cases you pay a simple $200 per year for your “infrastructure” investment.

    Which is the best buy?

    Well, obviously enough, the 5 year tank kills the others because it goes without saying that the home owner has a loan, and the home loan interest rate is around 7% so interest payments absolutely hammer any possible attempt to make a long-term purchase. Sadly, it is vastly cheaper to buy equipment that is known to be shoddy, fully intending to throw it away (in order to fill up rubbish dumps) rather than buy quality.

    This is a direct outcome of “normal” interest rates making the cost of money the most significant factor.

    Strangely, in the rather rare case that the home owner does not have any loans, and we consider some mild inflation, they are left with the decision of buying the more expensive “infrastructure” now, or investing money (let’s say in a bank account at 5%, of which 2% is eaten by tax). Suddenly the long-term infrastructure looks more attractive. Note that the physical-world decision changes for no reason relating to the product, no other reason than the financial circumstance of the buyer (and this seems wrong to me, with an engineering background).

    This is a direct outcome of our nonlinear taxation system, however I’d guess that to some extent a similar nonlinearity applies to government in as much as the penalty (in interest payments) for going into debt by X dollars is larger than the benefit expected from the same government going into surplus by the same X dollars.

    My conclusion is that trying to achieve long-term planned infrastructure by going into large scale debt is ineffective compared with small incremental expenditure paying back the debt ASAP each time round. This is presuming that no convenient economy of scale exists forcing a minimum “quantum” of infrastructure to be purchased. If you consider stimulus spending during a recession to be “investment” into social wellbeing and ameliorating the upheaval of economic restructuring, then since a strongly diminishing return applies, the rule should be to spend the smallest stimulus that tides the system over out of the recession, and avoid crippling interest payments (even when this strategy requires you to spend again in the near future).

    More interesting is that the further into debt a country gets, generally the higher the interest rate and the more cost-effective a short term strategy becomes; the less possibility of achieving any long-term goals.

  11. observa says:

    “More interesting is that the further into debt a country gets, generally the higher the interest rate and the more cost-effective a short term strategy becomes; the less possibility of achieving any long-term goals.”

    Doesn’t that simply depend on how the debt was incurred in the first place? In your example it may well be that many citizens borrowed heavily for stainless steel tanks and now the consequent interest rates mean a switch toward the 5yr ones as a result. That could just be redressing an imbalance with use of SS ones previously or perhaps savers in another country who invested heavily in 10-20 yr ones previously, now find they can more easily forgo some of their current income to satisfy overall HWS demands elsewhere and earn a margin. As you note, it’s the interest rate determined from past behaviour that governs the present choices as Mr Micawber knew only too well.

    You might also like to ponder that those frugal savers OS, who perhaps did not indulge themselves in alternative ‘McMansions’ and ‘flatscreens’, but rather availed themselves of well engineered SS HWSs, in turn driving up those systems’ prices by their increased demand, have given the current HWS demanders an offer they find less attractive in the marketplace nowadays. Such is life!

  12. Butterfield, Bloomfiled & Bishop says:

    So I think this means that Warwick said the government spent too much but didn’t say how much that was.

    Given the latest National Accounts would have been negative except for stimulus programs I am kinda glad the government gave Warwick’s advice the flick.

    We would have experienced quite a few negative numbers.

  13. . says:


    Private capital formation was crowded out by public capital formation.

  14. observab says:

    to BBB

    at th risk of making my point again,

    bbb – what would u prefer?

    school halls and pink batts brought about by direct govt spending


    more dwellings brought about by easier monetary policy and some investment in teachers

    the former would have employed, the tempoarily unemployed construction workers and the latter would have helped with a looming structural problem

    and as we go into resources boom mark II – we still do not have enough houses (or people) as the construction workers get pulled into non-residential work elsewhere and we start the population debate

  15. Butterfield, Bloomfiled & Bishop says:

    how do you have crowding out when the private sector was not looking to borrow but get their balance sheets in order.
    moreover if demand id falling like a stone investment is clearly falling as well.


    we had a credit crunch.Banks didn’t have the capital to lend.
    Even with a government guarantee they couldn’t get borrow overseas for quite some time.

    the school halls and insulation worked!

  16. Nicholas Gruen says:


    None of this looks too edifying to me.

    As a piece of macro, the fiscal stimulus seems in hindsight to have been perfect. Unemployment trended up, but not very sharply and then started falling long before elsewhere. That’s partly other factors and partly the stimulus. Had the stimulus been smaller unemployment would have risen faster, further. So, unless it was disruptive to the economy, damaging in some way, I’m finding it hard to see how one can argue that it was too much. What damage did spending that money and getting that unemployment result do to the macro-economy? I can’t see it.

    On micro, it’s pretty obvious that rushed spending will be less efficient than better planned spending. So the obvious question is, was rushed spending better than no spending (since spending that took its time wouldn’t have been a fiscal stimulus). Seems pretty clear that it passes that test. The cash splashes were well spent – by definition people know what they need to spend more or less. I would have liked to have seen more decentralised decision making on the spending side – rather than such a ‘themed’ approach.

    Things like the schools spending has ‘wasted’ some money, but how much? We don’t know, but my rough guess would be that the stimulus paid for 30% of its own cost through additional tax revenue from the additional activity it generated and associated multiplier effects. So I would have thought we got fair value for money there.

    But the idea that it was an obvious disaster – well it’s a propaganda coup for the Opposition and it’s their job to say it – but it doesn’t look particularly disastrous to me.

    But it’s completely beyond me how you can say in hindsight that the size of the stimulus was obviously too big.

  17. observa says:

    We won’t know how well insulation and school halls worked until the debt is fully paid off and by any stretch of the imagination it’s hard to argue we got value for money for that long term debt incurred. The govt trusted individuals with $900 and $950 tax tranches so why not staff and school councils with how best to utilise some windfall stimulus? The answer lies in no plaques or ribbons to cut if they spend it on furniture, painting, repairs, equipment, aiconditioning,etc. The wife’s school in the most marginal seat of Kingston had Gillard attend their ribbon cutting and true they had the staffroom dunnies painted just in case. Ask the teachers what they’d have preferred Julia dearie.

    Virtually free insulation for allcomers would beget a stampede and the inevitable, as well as piss off those who’d already shelled out their after tax hard-earned. Why not simply subsidise insulation materials sales and offer a cash rebate to existing in that regard? How do you think existing insulated homeowners feel now about the millions being spent to mop up the stampede fallout?

    As for credit crunches that’s what follows as night follows day with money printing, concomitant malinvestments and asset bubbles. We’ll see soon just how well Keynesian double bubbles fare with more funny money and guarantees to everyone. I’d be pretty nervous about that if I was you after listening to those G20 statements and their sudden lack of faith in the Mugabe millionaires road. Whassamater guys? Greek to you all of a sudden or just having a Minsky moment? (our economy has just stalled by the way and you got that straight from the grapevine)

  18. Butterfield, Bloomfiled & Bishop says:

    We have buggerall debt and if commodity prices stay around present levels then our gross debt may well be around $100b with most of that due to the economy not the stimulus.
    Insulation worked well.
    more Australians are now using less energy than before.

    An industry which was far from safe is lot more safer.
    As for BER it appears from Senate Hearings most of the complaints come from people who are confused about costing as the North Epping school example showed

  19. Corin says:

    Nick, I generally with your comment. However if the stimulus was smaller would interest rates be lower now? Does that matter? Unemployment would probably be marginally higher?? I guess that is the debate in a nutshell, if those making the decisions at Xmas time 2009 had known that the worldwide stimulus would be more successful than most thought it would be.

  20. Butterfield, Bloomfiled & Bishop says:

    I do believe Glen Stevens has answered your question Corin

  21. Nicholas Gruen says:

    Thanks Corin,

    Perhaps, but that’s an argument about how long the stimulus ran, not really it’s magnitude. And anyway, interest rates are approximately neutral right now.

  22. Corin says:

    BBB, I think he’s generally inferred that they are marginally higher but that i-rates would be heading back to neutral anyway … having said that I don’t read the RBA’s statements as frankly who has time when you work! I guess I’m stuck reading the Age and Oz etc … not sure I get enough from the horses mouth.

    Nick, I think the main mistake of the stimulus in hindsight might have been the increases in first home owners grabnt, but again this is a view with the benefit of hindsight. Let’s face it, property prices would have fallen substantially if here was a major recession, but given it didn’t happen they have risen above trend in the last 2 or 3 years.

  23. observab says:

    there are lots of problems with the quality of the spending as well as its lack of flexibility

    that’s why monetary policy – lower interet rates and a smaller fisacl boost – would have been better

    by the second half of 2009 – that is almost a year ago – it was clear that the the fallout from the financial shock was small and largely temporary for Australia

    by then banks were borrowing without the need for guarantees, liquidity spreads were back down, capital readily available etc etc

  24. Nicholas Gruen says:

    Monetary policy and fiscal policy expansions involve ‘distortions’ of various kinds which lead to inefficiencies. Personally I’d have liked to see interest rates down to near zero. But it would have led to higher house prices which hindsight may still demonstrate would have been a distortion away from the fundamentals.

  25. Corin says:

    Observab, I think it is possible to hold two views that:

    1. the stimulus as seen in early 2009 was probably right to be if anything too big; and

    2. Swan should have started to scale back more quickly some of the stimulus by Xmas 2009.

    On balance the stimulus should be generally seen as successful. So I generally agree with Nick but have marginal sympathy for your views.

    Perhaps with the benefit of hindsight, Treasury should keep an ‘off the shelf’ stimulus packages ready at all times of about 1% 2% and 3% of GDP (depending on need), with parts they can tailor as necessary. Clearly some of the stimulus spending could have been more rigorous and perhaps there is a role for the public service to be more ready for shocks.

    However most of the bad spending in my view was poloitical, see pink batts. It seems likely that this policy was driven out of the PMO even if it was overseen by Garrett.

    I was a Govt adviser in mid 2008 and to be honest, no-one thought the GFC would be material for Australia as far as I recall. Perhaps Swan and Rudd might have had advisers working on it but not to my knowledge. The fact that tanner thought the first stimulus potentially unnecessary (according to Uren and Taylor) indicates it was not widely held. I had left by Lehman’s collapse but I think that obviously shifted the risk profile. I think if anything the Rudd Govt should have been preparing earlier a large stimulus in the off chance that the American experience would be more contagious than was likely (at least seen in mid 2008). Clearly it turned out to be very contagious.

  26. Butterfield, Bloomfiled & Bishop says:

    No Corin,
    Glen made the Statement he really did not want to be in the situation of having interest rates around 1%. He preferred where they were at their lowest.

    The problem with only using monetary policy is that we had a credit crunch. Banks could not get funding even with a Government guarantee.
    It is absurd to say we could rely only on monetary policy plus automatic stabilisers.
    If one was referring to 1991 or 1982 one would be correct ( and quite Keynesian) however even though we did not experience a liquidity trap like other nations the credit crunch impaired monetary policy so much we needed a fiscal stimulus and it succeeded admirably.

  27. observab says:

    there’s a long way from over 3 to 1% on cash rates…and its does depend on intermediation costs and credit availability too

    but what we are arguing is
    1. the mix was wrong
    2. fiscal policy was too big, poor quality and too long

    all up a policy mistake – albeit most countries are still envious of Australia’s sound fiscal position

    and i like Corin’s idea about fiscal contingency plans for shocks

    we have at least learnt that the financial system needs to be stress tested …

    and seems like a very good idea to do ex ante stress tests of the fiscal policy – esp focussing on the disrectionary levers….and avoiding bad politics if we can..

    more and better teachers than school halls!
    more efficient ways to save energy than pink batts!
    cash splashes not for the rich!
    fhb’s for kids of rich people!

  28. Butterfield, Bloomfiled & Bishop says:

    observa as I understand it only Sweden have infrastructure projects ready to go if a financial catastrophe arrives.
    We didn’t.
    We didn’t even have plans to complete the dual carriageway of the pacific highway. only the most important transport route in Australia.

    if we had that well and good. We had nothing.

    Glen Stevens has made it abundantly clear he didn’t want to cut rates to 1%. This is surely clear even to you.

    how was it a policy mistake. in the last quarter we had positive growth because of the stimulus. That was the last quarter.

    If you wish to reduce the stimulus quicker then you need a quicker pick up in the private sector.
    It is coming as you would expect after such a stimulus.

    first of all you have to show the stimulus was too large.
    no-one yet has done that. As Nick has said the evidence thus far is that it is just about perfect.

    Secondly if you wish to argue it was too large then how large should it have been.

  29. Corin says:

    For what it’s worth, this is what I said in December 09: http://www.onlineopinion.com.au/view.asp?article=9739

    I think it is largelt true now as well. Obviously Rudd is not riding high in the polls! He’s not riding at all!

  30. ralf says:

    I read some of the reports, attributed to Mr McKibbin, and defend his right, as an important person, representing our combined public interest as a member of The Reserve Bank of Australia. In my opinion, he has a democratic right and responsibility to make known his trained-economically-learned opinions to all Australian citizens, interested. We are all of us engaged in broadening humanity’s ‘vision’ for freedom from want and fear. The history of modern capitalism, probably since 1776 during the period of Adam Smith’s ‘Wealth’, and almost a century later during the period of Marx’s ‘Capital’ always mesmerizes me when I read these great works and think about current events. One fact cannot be denied, that individuals wishing to realize their personal aspirations, in the end always have to account to the great majority in one way or another. The Liberal’s and some in the Labor Party’s who believe that individualism reigns supreme on this planet with ever scarcer resources are only kidding themselves. The end game for personal wealth and riches is always redesigned by the process of labour reshaping capitalism. A famous NSW State politician once quipped, “the only good about the laboring working class is to work yourself out of it”!

  31. ralf says:

    Number 28 has it in a nut-shell, “we didn’t even have the plans to complete…”
    Indicates what seemingly “ad-hoc” muddled styled planning approach we use to pretend to ourselves how good we are, when compared to other developed nations. And yet, because of our huge physical natural assets, set in what remains, apart from parts of City/connected country centers; remain as it were; a frontier sort of nation. In this context we continue to dispute due to ‘methodenstreit’- the bitter Deutscher dispute over methodology – of over a century ago. And this is because in my opinion, people practicing economics are failing to understand the need for a “theory” of value, as distict from a theory of price, and would be hard pressed to explain the difference between the two.
    This then reveals the vacuum of knowledge in our political leadership as they ‘grope’ for a shred of understanding when dealing with some of their counterparts in the USA and elsewhere. I recall professor Garnaut warning about the impacts when Howard and Bush negotiated the Australia USA free trade agreement. This was a unilateral trade agreement. And on current reported statistical data, Australia has lost billions. So back to number 28, the size of the stimulus? We save through ALP invented superannuation planning, badly managed during the Howard years. Why? because he failed to increase the value of it. And with this failure he brought in confusing ‘private’ management process leading to heavy losses for some retirement savers. Costello was clever for his “quick talking grab your money constituency” but not so clever for a nation requiring a high speed train system and a high speed, efficient Pacific Expressway from Adelaide to Cairns. And we are at it again with these stupid slogans, “A Great new Tax” from a well trained Dullard Liberal Leader only interested in the job description of PM, showing no real aptitude for political leadership required to build a great 21st century nation. And a Labor leadership so confused over its understanding of the ways and means of global capital, changing their political “BAA-AA” focus immediately the “sheep” look over the fence and begin to move into a different paddock. The current theatre of social/economic/political stage act resembles “Animal Farm” in all its detailed form.
    Having read Gittins, Garnaut et al over the years, they have banged on about the question of value. The problem regarding values, the neglect of value does not remove the issue from economic inquiry, like “labour theory” of value, postclassical with its “utility theory”-powerfully influence the constitution of economic thought itself by identifying the different elements within the social process as strategic for our understanding of it.

    I recall some years ago, whilst visiting Parliament, during a lunch with certain politicians, I was told that amongst them, they were members of a certain “Christian” assembly. That they wanted to maintain “true” values and so on. This motivated me to ask why some of them assembled in parliament to “pray” before the meeting started. The answers were rather disappointing for me. Statements like, “we believe in a god” or “to maintain our ‘valued’ christian way of living” and so on were revealed. What in my opinion failed to be revealed was the fact that in Australia our votes are counted equally. The poor mans vote is equal to the rich mans vote. The problem of value, however, indicates that the politicians we create, whilst apparently believing in a “christian” god make laws which in my opinion distort their promised prayers to deliver equality of opportunity and all the social ills this nation has to grapple with each and every day. And has we have discovered, religion does not remedy our social poverty but seems to compound it.

  32. observab says:

    re 28 and size,

    in part due to too large a fiscal stimulus – inexcess of $40 bn over 2009 and 2010 – Australia will recover the temporary loss of output and jobs and return to full employment by late this year/early next – well ahead of most countries

    and by building school halls (and installing pink batts if we could properly) etc

    i would have preferred to spend $10 bn less (or about 1% of GDP) and have tradesmen building homes, we definitely need now!

    and now labour is turning to school uniforms – rather than school teachers- another structural problem that will hold us back as we run into supply side pressures and the RBA raises interest rates past “normal”

    and as interest rates go past normal and prices bidded up, we still will not close the housing shortage and the property outsiders – mainly the young and of course the relatively poor will remain locked out!

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