Economists slam Rudd Government’s stimulus handout plan

The Senate inquiry into the Rudd Government’s $42 billion stimulus plan has been told that the $12 billion of cash handouts contained in the package will be wasted and will only have a short-term benefit for the economy.

Reserve Bank board member and Australian National University professor Warwick McKibbin and RMIT economics professor Sinclair Davidson have both told the inquiry that bringing forward planned tax cuts or temporarily cutting the GST would have a longer-lasting benefit than cash payments.

McKibbin also claimed the stimulus package was too large, and argued room should be left for the Government to launch further measures if required in the future.

“Australia does not yet have a domestic financial crisis, but it does face a substantial reduction in exports and substantial decline in the wealth of its citizens,” he says.

“The first job for this package should be to help restore confidence.”

Davidson argued the package would be wasted. “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?” he says.

“This particular package has got a very low bang for buck, and there are certainly (a) substantial amount of bucks involved in the project.”

The executive director of the Australian Retailers Association, Richard Evans, also appeared before the inquiry. Instead of cash handouts, he would like to see the Government give out vouchers for use in retail stores. He argues that this would ensure the money is spent, not saved.

“There is something uncomfortable to us about taxpayer funds being used to reduce credit card debt.”

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