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The fault lines of the Rudd stimulus package(s)

By Arthur Thomas - posted Wednesday, 11 March 2009

Whether it is the ventriloquist in Washington or the ventriloquist's dummy in Canberra, posturing, rhetoric, and massive consumer spending incentives for voters is no alternative for Australia's realistic and effective economic management.

The infrastructure component of the package is a realistic, if not overdue, strategy especially in Queensland where the opportunity to develop failing infrastructure with massive revenues from coal exports was lost and cost Queensland millions in revenues and credibility.

The consumer-spending component of the package is where the serious faults lie by ignoring the basics behind the philosophy.


Successful Keynesian based revival relates to an economy capable of regeneration by revitalising a diverse industrial, manufacturing, and agricultural base with potential surplus capacity that could respond to a major boost in consumer spending. The money circulates throughout the economy saving jobs and returning to government coffers and eventually revives the economy. The trade off is a deficit of manageable proportions.

Compare that basis with Australia today.


Our agricultural base has been in decline for decades resulting from drought, cyclical demand, and low prices for wheat, wool, and meat. The rural economy has changed dramatically with the demise of once thriving rural centres and communities as once family owned properties became part of large mechanised operations reducing demand for local labour, services, and goods. Schools, libraries, post offices, banks, rail services, sporting and social function facilities have been decimated. While our fruit and vegetable producers have also expanded, there is more reliance on illegal foreign seasonal cash workers to compete against cheap imports.

The vast drought prone plains of New South Wales and Queensland that once supported sheep and cattle now grow cotton, consuming vast volumes of underground water as well as diversion of more vast volumes from seasonal flood-reliant major river systems. Because of world demand, cotton became one of Australia's new agricultural export earners. Drought remains the great leveller, and cotton's contribution to export revenues slumped as crops died of thirst and redundant workers in single employer townships add to national unemployment.


So what of the consumer?

The stimulus package strategy for the consumer is to spend, spend, spend on consumer goods to support the retail trade supposedly to support Australian industry producing those goods, maintain employment, and revive the Australian economy.



The jobs, jobs, jobs strategy acknowledges the effects of the severe downturn in export resource based and support industries as thousands of workers have, and will continue to, lose their jobs.

The Rudd solution is to provide retraining to enable workers to secure employment in other sectors of the Australian economy.

So what are these other fields of employment?

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About the Author

Arthur Thomas is retired. He has extensive experience in the old Soviet, the new Russia, China, Central Asia and South East Asia.

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