Tuesday, October 14, 2008

Pokies expect a good Christmas

Rudd pumps in $10b - National - smh.com.au

There's some pretty surprising generosity from Kevin Rudd in his stimulus package. The part of it for pensioners and parents comes as a lump sum just before Christmas. The argument against that: they'll blow it all at once on holiday fun, and still can't afford groceries before or after. The argument for it (un-stated, but I would guess someone in Treasury has said it): we want them to spend it quickly, and not just on groceries.

It seems an odd choice to be using pensioners as the people you want to encourage to spend and stimulate the economy.

The new home buyers increases are good for builders and real estate agents, but is this the area of the economy that is in most need of stimulus?

I suspect there will be criticism from both left and right that this should have been better targeted.

3 comments:

Anonymous said...

A bit harsh Steve. I think there was a lot of merit in the raft of measure announced. It all makes sense to me given the current economic climate, especially the one off payments to pensioners. The whole idea is for people to spend it and in doing so, prevent a major downturn in retail spending leading up to xmas.

Geoff said...

Bah humbug Steven...

Have to agree with digital frog.

Pensioners are the ideal choice as they will actually spend the money. The poor spend more of their income because they have to - they are therefore the perfect group to give extra money to if you want it spent.

Besides, if he has to be done, who else deserves it - tax cuts have already helped everyone else a bit.

Steve said...

Hey, both of you, I would hardly call it "harsh" criticism!

I know there is very little criticism of the move by anyone, but it seems to me that a further criticism (barely mentioned by Fran Kelly on Radio National this morning) is that it's likely to be a very short lived boost to the economy. Why not (my idea here) give the pension boost in two payments over two quarters? The lump sum encourages spending it in one hit anyway, but giving it all before Christmas means there will be a lot of happy grandchildren and toy retailers, and not much spending left in the first two quarters of next year.

Other people have also pointed out that other poor welfare dependents would have spent it pretty quickly too.

As for housing increase, there has been a bit of criticism about that, but pretty muted. Everyone knows it increases house prices, which will certainly be welcome in some parts of the country which feel the market correction has gone too far, but I still suspect this area could have been better targetted, especially by a Labor government.