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too much spin? « Previous | |Next »
June 20, 2009

George Megalogenis makes two key points in Let reality do the talking in relation to the second part of the Labor government’s economic stimulus package. Megalogenis rightly acknowledges that the structure of Labor’s stimulus package --the money flowing through the real economy--- is one in which the school building program aims to take over from the so-called cash splashes.

The first point made is that the second strand of the stimulus package is working:

Construction, the sector that usually leads the nation into a jobs recession, happens to be hiring again, according to this week’s official statistics. That makes it two ticks so far for the stimulus. Phase one, the $20.1billion in cash handouts, propped up consumer spending. Now phase two, the $14.7bn school-building extravaganza, is keeping the blue-collar tradie off the dole queue.... The construction sector had shed 15,000 jobs between last August and February. But 10,000 jobs were added in the three months to May - that is, after the second stimulus package was announced in February. Over the year to May, construction employment is up 8500, or 0.9 per cent. To put that result in context, construction had lost 50,500, or 4.3per cent, of its workforce at the equivalent period of the last recession in the early 1990s.

So the stimulus is doing the job it was designed to do--- a quick hit to the GDP in a context where many constructions are being finished slowly, some developments have gone bust, and there are few new big developments being started. Presumably, this hit holds things---helps prevent a deeper recession--- together until the big infrastructure projects come on line.

Megalogenis' second point is that a question mark should be placed over the second stimulus package in terms of whether the money is being spent wisely. There are examples of this not being the case. He says:

Kevin Rudd confuses the worthy exercise of sandbagging the most volatile part of the labour market with nation-building...Labor couldn’t have it both ways - spending promptly and investing wisely - so it sacrificed efficiency and equity for haste. ...Rudd lumps the mass school maintenance, announced in February, with the budget’s infrastructure agenda. This is where he invites confusion because he is selling a gymnasium and a road or a port as the same thing. Plainly they are not. If the economy wasn’t on the edge of recession, the gym may not have attracted the taxpayer chequebook. But the road or port would have been built, preferably by the private sector or in a public-private partnership in keeping with Labor policy.

Megalogenis is right on this: calling the money for school maintenance and buildings nation building is spin, since the word 'nation building' has historically meant really big infrastructure projects.

What is unclear is why Labor needs to spin in this way when the stimulus is working. It doesn't cover up the obvious flaw that nation building is more business-as-usual and has very little to do with making the shift to renewable energy. Is it the consequence of the obsession with media management? Is it a bad response to the Coalition's attack on Labor's Keynesian policies?

The question mark has the effect of increasingly interpreting Labor's reform policies as more about spin than action. My judgement is that the reform current of Rudd Labor is weak--the light on the hill flickers in the darkness. Most of the reform rhetoric looks increasingly like spin to cover up inaction.

| Posted by Gary Sauer-Thompson at 12:59 PM | | Comments (2)
Comments

Comments

A clear example of the weak commitment to reform is the way Labor allowed a delay in legislation to require 20 per cent of Australian energy to come from renewables by 2020. They tied it to the legislation for the Carbon Pollution Reduction Scheme rather than treating it separetly.

Chris Berg, a research fellow with the Institute of Public Affairs and editor of the IPA Review, says in Stimulus (n): a huge sum of money spent on any old crap in The Sunday Age that the some of the spending inculcates belief that the sole task of federal politicians is to snatch as much money out of the common pool of taxation as they can.

The community infrastructure program reproduces this principle on an industrial scale. Government MPs will dine out for years on the photographs of them wearing safety hats while observing the construction of sheds and toilets in every corner of their electorate. And that may be the whole point.

His point is about the wasteful spending--- the pile of crap. He doesn't consider the question whether the spending is working in terms of easing the recession.