stimulus package

Protect us from ourselves

I got this email today, from a colleague.

“Joe Smith started the day early having set his alarm clock ( MADE IN JAPAN ) for 6am . While his coffeepot ( MADE IN CHINA ) was perking, he shaved with his electric razor (MADE IN HONG KONG ). He put on a dress shirt ( MADE IN SRI LANKA ), designer jeans ( MADE IN SINGAPORE ) and tennis shoes ( MADE IN KOREA ). After cooking his breakfast in his new electric skillet ( MADE IN INDIA ) he sat down with his calculator ( MADE IN MEXICO ) to see how much he could spend today. After setting his watch ( MADE IN TAIWAN ) to the radio (MADE IN INDIA ) he got in his car ( MADE IN GERMANY ) filled it with Petrol from Saudi Arabiaand continued his search for a good paying Australian JOB At the end of yet another discouraging and fruitless day checking his Computer (MADE In MALAYSIA ), Joe decide to relax for a while.. He put on his sandals ( MADE IN BRAZIL ) poured himself a glass of wine (MADE IN FRANCE.! ) and turned on his TV ( MADE IN INDONESIA ), and then wondered why he can’t find a good paying job in … Australia….. “

Is it just me or is protectionism so hot right now? “Buy local” campaigns are the new economic black. I think A Current Affair is running a story (or they have already run it) encouraging their legion’s of viewers to buy Australian made. It’s odd. And pretty stupid. In fact I think it’s just clever marketing and a nice, easy PR campaign to boot. Who’s not going to cover a story about keeping locals in jobs. It seems the first thing advertisers do in a recession is call for protectionism – buy local campaigns etc…

Magnetic Island is in the midst of a protectionism row at the moment after a local operator missed out on a tender to a Sydney based comments. This operator’s comments to the local paper that these fly by night Sydney operators would “be crucified” if they tried setting up on the island no doubt does our region a world of good as we try to attract investment and tourists. Here’s a message to you new businesses from the businesses on Magnetic Island… “die or we’ll kill you”. Nice.

The campaign to reverse the Townsville City Council’s incredibly above board tender decision took on new legs over the weekend with a protest group carting around signs that said “Beach Hire is un-Australian” and “local jobs for locals”… Apparently coming from Sydney is un-Australian now. Basically this guy thought the job was his by right – and barely even scraped together a tender (and submitted it after the closing date). He lost. That’s life. Move on.

I like to preface these pretty broad posts by saying “I’m no economist but” so here’s the standard disclaimer. I’m no economist but in the face of a global financial crisis it doesn’t make sense to be acting in the national not global interest – because to me, the bigger problem for Australian jobs is the rapidly collapsing resource sector. A collapse fuelled by slowing demand from overseas. That’s right. We export this stuff. So we need other countries to be in a financial position to buy our stuff.

This is why I think the fact most of the stimulus package being spent on things produced overseas is a good thing. Sure, buying local is good. But buying foreign made is ok. And why should we value employment in our prosperous country with better than adequate social security over jobs in other countries with non-existant unemployment payments?

I’ve had a few conversations with a few people who “don’t want the money from K-Rudd” on principle. That’s fine. Give it to me. I’ll spend it wisely.

These conversations go along these lines:

1. We should be helping big business that’s how to fix the economy
2. We should be investing in infrastructure that’s how to help the economy – we need to be ready for the next resources boom…
3. This money is only going to keep retail employees in jobs – and most of it will go overseas to China.
4. It’s a big debt that we can’t afford to pay now – and it will be a burden on future generations.

From my very, very laymans meta-analysis of the current economic situation the downturn in Chinese production fueled by the lack of demand for their products seems to me to be a pretty prime factor in our resource prices tanking.

Pouring money into Chinese manufacturers is a good thing because not only will it give us access to technology as they develop it to suit demand, it will also stimulate demand for our resources – there won’t be another resource boom if other countries don’t want to grow and develop.

Sure, we could have a locally driven resource boom. But then the Greens would get angry that we’re chopping down trees to pave paradise for multi-storey car parking.

The debt thing is an issue – but once we’ve decided to spend money saving the economy rather than letting it tank completely and picking up the pieces the solution is going to require spending money, and governments are really the only entities in a position to borrow.

So here’s the response I sent to my colleague… some of the points are a stretch – but I wish sometimes people would think a little bit past the obvious “that money’s going to support a Chinese person not an Australian person” bias.

“Joe Smith started the day early having set his alarm clock ( MADE IN JAPAN – using Nickel from Townsville) for 6am . While his coffeepot ( MADE IN CHINA (using aluminium mined in Australia) – (with coffee grown on the Atherton Tablelands ) was perking, he shaved with his electric razor (MADE IN HONG KONG ) (using technology developed in Australian universities). He put on a dress shirt ( MADE IN SRI LANKA – using cotton grown in Australia ), designer jeans ( MADE IN SINGAPORE – also using Australian cotton) and tennis shoes ( MADE IN KOREA using Australian leather ). After cooking his breakfast in his new electric skillet ( MADE IN INDIA from Australian steel ) he sat down with his calculator ( MADE IN MEXICO using components made from Australian resources ) to see how much he could spend today (based on Australian research). After setting his watch ( MADE IN TAIWAN using Australian components and sold to him by an Australian salesman ) to the radio (MADE IN INDIA and installed, repaired and serviced by Australian technicians ) he got in his car ( MADE IN GERMANY – sold in Australia by a local dealer who employs local mechanics – unless the locals are so lazy that he has to bring in workers from overseas ) filled it with Petrol from Saudi Arabia (shipped to Australia by an Australian company, transported by Australian truck drivers) and continued his search for a good paying Australian JOB (he wasn’t looking hard enough) At the end of yet another discouraging and fruitless day checking his Computer (MADE In MALAYSIA ), Joe decide to relax for a while.. He put on his sandals ( MADE IN BRAZIL – That is unAustralian – he should have been wearing pluggers) poured himself a glass of wine (MADE IN FRANCE.! – again, there’s plenty of good Australian wine) and turned on his TV ( MADE IN INDONESIA filled with Australian content), and then wondered why he can’t find a good paying job in … Australia….. probably because nobody wants to buy our resources anymore because we’ve stopped buying stuff, or he’s too lazy to do anything he considers “menial” or beneath him…”

Stimulus rains on cats and dogs

Apparently “literally hundreds” of cats and dogs will be receiving stimulus money inherited from pensioners who’ve died since filing their last returns. If these pensioners bequeathed their estates to their feline or canine companions and a tax return was filed the animals get the one off payment.

Joe Hockey is jumping up and down crying fowl (because chickens don’t often get these sorts of rights)… he thinks it’s a waste of money.

But really, the stimulus is only effective if the recipients spend the money. I don’t know if cats and dogs are renowned savers, and I would have thought pet stores needed the stimulus money as much as everyone else. If they go out of business where are desparate pensioners going to get their food from?

Frankly I think the money that went to pensioners overseas was more concerning – but I don’t really see how complaining that the Government is pumping money into the economy (via our pockets) is going to score any political points at all.

More stimulating discussion

“By contrast, new converts to Keynesianism, such as Rudd and Barack Obama, believe in a positive multiplier. They believe extra government spending, like handouts to those most likely to spend it, creates new income on top of the governmental spend, as the unemployed are put to work.

This process is brilliantly satirised by Norman Lindsay’s magic pudding, which freely recreates itself the more that is eaten. The magic pudding perfectly captures the unmet promises of Australian politicians.”

UNSW Professor of Finance Peter Swan in the SMH.

I probably tend to think this policy is a bad idea. But I want to have my cake and eat it too. How’s that for a mixed metaphor.

I would like the government to give me $950. It’s only fair after they taxed me to give all that money to other people.

But I think it’s a bad idea for them to give other people money. I suspect a large amount will be whacked into paying off debt or savings accounts. Which is a positive cultural turn.

Treasury secretary Ken Henry says the stimulus will work – and interest rates will still need to be lowered. At least I think that’s what I heard on the Today Show this morning. If we weren’t planning to become students again at some point in the future now would be a great time to buy. Although I think there’s more hurt for home prices to come.

Green cloud has silver lining

Roof insulation companies around the country are rejoicing. Proving once and for all that the best way to come out of climate change ahead is to invest wisely in companies seeking to mitigate the effects of rising temperatures and hysteria.

These Brisbane insulators say they’ll make millions after K-Rudd included free installation of insulation in the stimulus package.

The silver lining at the moment is for green businesses – but I reckon at the end of the day it’ll be the people producing air conditioners, freezers, icecream and cold drinks that will really reap the rewards of climate change.

Stimulating discussion

There’s a bunch of interesting commentary on the current stimulus package and associated bickering. It’s stimulating, if you’re into that sort of thing.

The Libs are taking the high “unpopular road” looking to block it. Claiming they’re doing the right thing, while the Labor Party is politicking “like a scared soldier firing all their ammo at once” – not a bad quote there from Turnbull.

It’s a dangerous game keeping money from voters while calling for lower taxes. Looks a bit like protecting the wealthy. Trickle down economics. I know I’ll be annoyed if they block it.

If Rudd wanted to score maximum points out of this politically he should have gone with a much bigger figure than $950. Say $3000. Something the coalition would have to block, rather than just grandstanding. Then when they blocked it and triggered a double dissolution the coalition would have to try dislodging a popular PM, having just robbed the voters of $3000. Political suicide. How much is a vote worth I wonder…

Articles from the SMH are written by, or quote, the following people:

Peter Costello

“Rudd, the fiscal conservative of last year, was attacking the Coalition government because it hadn’t cut spending enough. He promised to do more. He wasn’t worried about all those “neo-liberal” ideas on careful spending, balanced budgets and low debt. He was complaining it hadn’t gone far enough.”

Costello Re: the last stimulus package…

“If the purpose of the payment was to boost sales at Woolworths, the Government should have bought the goods and distributed them to pensioners and families. But it is a low-quality use of $10 billion.”

And more commentary from Annabel Crabb… on parliament yesterday…

“Hilarious nerd insults were exchanged.Rudd accused Turnbull of fancying Milton Friedman, and Turnbull retaliated by calling Rudd “Whitlamite”, the nastiest word in the Liberal nerd insult dictionary.

Then Lindsay Tanner accused Julie Bishop of having a soft spot for the Reagan-era economist Arthur Laffer.

Really, they all sounded like back row hecklers at a second-year economics open mike night.

Debate was then suspended for several minutes while a noisy band of protesters shrieked: “Human rights for all. Stop the intervention.”

In case you were wondering, they were not talking about the socialist state’s intervention in the free market.”

Even Top Gear’s Jeremy Clarkson, out here on an Australian tour, weighed in with this sterling commentary:

“”He (Rudd) genuinely looked terrified. The poor man, he’s actually seen the books.“[In the UK] we’ve got this one-eyed Scottish idiot, he keeps telling us everything’s fine and he’s saved the world and we know he’s lying, but he’s smooth at telling us.”

The last word goes to Economics columnist Ross Gittins – who explains that this stimulus is unusual but might work.

“But it will be the most anticipated recession we’ve had. Normally we get the recession and then the response to it. This time we’re getting the cure before we’ve seen all the symptoms.

Why? Because so much of the global recession we are caught up in emanates from the Wall Street debacle. Since the crisis reached its peak in October we’ve been able to see its consequences coming, like a slow-motion tsunami rolling across the Pacific.”

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