Daily Bulletin


Daily Bulletin

News

  • Written by Richard Denniss, Adjunct Professor, Crawford School of Public Policy, Australian National University
The big stimulus spending has just begun. Here's how to get it right, quickly

Responding to COVID-19 required governments to make hard choices with enormous consequences. The biggest were whether to let the disease rip, lock it down, or strike out in search of a middle ground that delivered the best of both worlds.

Different leaders made different decisions and will ultimately be judged by their citizens and historians. But it’s not just in health that COVID-19 requires choices with enormous consequences – it’s also in spending.

Two months ago the government announced a A$17.6 billion coronavirus stimulus package. Remember when that was a lot of money?

Since then it has committed to spend an extra $200 billion.

$200 billion has become base camp

Should we just let the government rip through hundreds of billions more in an attempt to quickly stimulate the economy? Should we put all proposed spending through lengthy cost benefit analyses and parliamentary inquiries?

Or is there some sort of middle path?

In a new paper by The Australia Institute, Design Principles for Fiscal Policy in a Pandemic, Matt Grudnoff, David Richardson and I set out eight criteria on which to judge spending proposals in order to expedite public and parliamentary scrutiny.

Read more: It's just started: we'll need war bonds, and stimulus on a scale not seen in our lifetimes

While not all voters will be able to agree on what the most pressing problems are, presumably all voters agree that when it comes to spending vast amounts of public money it is important to have some clear criteria against which voters can subsequently judge the necessarily rapid decisions that are made.

The first two are for stimulus spending to be large in size and speedy in implementation.

The other six use economic theory to help maximise benefit for bucks.

Target households with high marginal propensity to consume

Low income households have a higher “propensity to consume’” than wealthier families who can afford to save some of what they receive. Saved stimulus does nothing to increase demand and employment in the short term.

Direct government spending on goods and services is another way to ensure that money is spent quickly.

Target domestic production

Money spent on imported cars, imported electronics or imported capital equipment will diminish the local benefits of stimulus spending.

Target activities with high employment intensities

Some industries create more direct and indirect jobs per billion dollars of spending than others. Capital intensive mining and construction projects, for example, create far fewer jobs per billion dollars spent than spending on health and community services.

Target those most hurt by the crisis

When considering stimulus spending the government should focus on projects that provide employment opportunities to individuals in industries most affected. Two of these are tourism and hospitality. While such an approach is equitable, it is also efficient as it helps ensure that the skills of the newly-unemployed match those needed by needed by new projects.

Target regions that are most disadvantaged

Building new train lines in NSW might be a good long run investment for the country, but it will do little to create jobs for tourism workers who have lost their jobs in Queensland. Stimulus spending targeted at the regions most effected will be the most likely to socak up unemployment.

Target useful projects that deliver benefits

When considering stimulus spending the government should think about what we want more of after the crisis has ended. An example from an earlier stimulus program is the ocean baths that dot the NSW coastline.

Many were built in order to generate employment during the great depression, yet almost 90 years later we are still enjoying the additional secondary benefits.

Most good projects will meet most of the criteria

While not all good projects will meet all of the criteria spelt out above, most good stimulus projects will meet most of them.

The enormity of the discretionary spending that the Morrison government is about to undertake on our behalf is almost impossible to fathom.

In a normal year the Commonwealth spends $500 billion on all of its services.

In the past two months alone it has committed to spend an additional $200 billion, and it hasn’t even started on the extra spending that will be needed to restore economic health as restrictions unwind.

Read more: Look beyond a silver bullet train for stimulus

The enormity of the spending that will be needed means that, more than ever before, the decisions it makes over the next few months will determine our economic success for decades to come.

For all our sakes it is important it gets these decisions right.

Using principles we have set out for assessing the myriad of potential projects it will consider will give it the best chance to make the biggest difference, and give us some confidence that even though decisions are being made quickly, they are being made well.

Matt Grudnoff, Senior Economist at The Australia Institute, contributed to this piece.

Authors: Richard Denniss, Adjunct Professor, Crawford School of Public Policy, Australian National University

Read more https://theconversation.com/the-big-stimulus-spending-has-just-begun-heres-how-to-get-it-right-quickly-138414

Writers Wanted

Climate explained: humans have dealt with plenty of climate variability

arrow_forward

Why do bankers behave so badly? They make too much money to ask questions

arrow_forward

Incredible balcony makeovers to inspire your gardenless gardening

arrow_forward

The Conversation
INTERWEBS DIGITAL AGENCY

Politics

Did BLM Really Change the US Police Work?

The Black Lives Matter (BLM) movement has proven that the power of the state rests in the hands of the people it governs. Following the death of 46-year-old black American George Floyd in a case of ...

a Guest Writer - avatar a Guest Writer

Scott Morrison: the right man at the right time

Australia is not at war with another nation or ideology in August 2020 but the nation is in conflict. There are serious threats from China and there are many challenges flowing from the pandemic tha...

Greg Rogers - avatar Greg Rogers

Prime Minister National Cabinet Statement

The National Cabinet met today to discuss Australia’s COVID-19 response, the Victoria outbreak, easing restrictions, helping Australians prepare to go back to work in a COVID-safe environment an...

Scott Morrison - avatar Scott Morrison

Business News

How To Remove Rubbish More Effectively

It can be a big task to remove household rubbish. The hardest part is finding the best way to get rid of your junk. It can be very overwhelming to know exactly where to start with so many option...

News Company - avatar News Company

4 Tips To Pass Skills Certifications Tests

Developing the right set of skills is valuable not only to your career, but for life in general. You can get certified in these skills through obtaining a license. Without a certified license, y...

News Company - avatar News Company

How to Secure Home-Based Entrepreneurs from Cyber Threats

Small businesses are becoming a trend nowadays. The people with entrepreneurial skills and minds are adopting home-based businesses because of their advantage and ease of working from home. But...

News Company - avatar News Company



News Company Media Core

Content & Technology Connecting Global Audiences

More Information - Less Opinion