Julia Gillard on the need for the stimulus.
Employment Minister Julia Gillard said there were still 128,000 more people without work than there were in September 2008, when the global financial crisis struck, and this justified continued stimulus spending.
But the Rudd government, at that time, was worried about the inflation genie. Unemployment in September 2008 was measured at 4.3 percent. According to the MYEFO (at page 24), released late last year, the NAIRU is five percent.
The unemployment rate is projected to decline steadily over the period from 2011-12 to 2014-15, reaching the non-accelerating inflation rate of unemployment (NAIRU) of 5 per cent in 2014-15, two years earlier than anticipated at Budget.
Unemployment is now measured to be 5.3 percent.
You really are pathetic Sinkers.
in the first budget we merely had a credit crunch which seemed to be waning.
Thus the government needed to eliminate the b$8b structural deficit.
The GFC which started around September changed all this.
Is it too much to ask you can do elementary research at all?
The continued stimulus spending according to most national accounting is now reducing the rate of growth.
This is agreed by all mainstream economists.
It is rejected by crackpots such as yourself which is one of the reasons why you get things so wrong most of the time.
If you wish elimination of further stimulus spending it is incumbent on yourself to show the private sector is going to grow gangbusters.
to this end no-one has done this.
Swan has said real growth in spending will be limited to 2%.
This is an easy thing to do.
Taxation will also grow in the weak areas of capital gains gains and company tax given the state of the economy and in particular the rising terms of trade.
It is hard to visualise the terms of trade rising so strongly when the main world economies are so weak.
Butterfield, Bloomfield & Bishop
12 Mar 10 at 9:42 am
Homer,
What a lovely way to start a conversation. I also note you’ve called someone else Forrest Gump for believing there was a credit crunch.
Semi Regular Libertarian
12 Mar 10 at 10:43 am
He said there was a credit crunch in the early 1990′s. perhaps you want to believe that fairytale as well.
In the early 1990s even with their exposure to commercial property no bank had a problem accessing the capital markets.
It was only recently no bank could access markets even with a government guarantee!
That is a credit crunch.
with Sinkers it is the same old same old.
Never let history get in the way of why something happened.
It gets rather repetitive showing up his mistakes
Butterfield, Bloomfield & Bishop
12 Mar 10 at 10:55 am
“perhaps you want to believe that fairytale as well.”
I know a former senior loans manager who confirmed what JC said about recapitalising.
Semi Regular Libertarian
12 Mar 10 at 10:59 am
The GFC which started around September changed all this.
Is it too much to ask you can do elementary research at all?
The “GFC” started in 2007, not September 2008.
Good research, Homer.
C.L.
12 Mar 10 at 1:25 pm
Homer, you say you are committed keynsian who keeps protesting that fiscal policy is only used when at the zero bound. I wish I had a dollar for everytime you have claimed here that post-war fiscal policy is not keynsianism. So shut the fuck up you liar.
Pedro
12 Mar 10 at 2:19 pm
Err CL the credit crunch was existence when the FIRST budget was given. The GFC happened in the September after that.It would take much research to understand that but your maths will probably be out given you think 1950/60 is 1890.
The government was never worried about inflation in its second Budget only in its first. They thought the GFC would cause inflation to fall considerably.
Pedro I could try to teach you why that is so but it would mean understanding economics so I will not however a cursory reading of the General theory would bear this out. Liquidity trap anyone.
sorry your pants are on fire
Butterfield, Bloomfield & Bishop
12 Mar 10 at 2:31 pm
There has been much mimicry of your prose, Homer, but it’s a little like putting on a fat suit and thinking we can sing like Pavarotti. I bow to the master. Bravo.
Infidel Tiger
12 Mar 10 at 2:55 pm
Was Australia in a liquidity trap, Homer?
Semi Regular Libertarian
12 Mar 10 at 2:58 pm
After your McFarlane bungle, I question the value of educating you about something else pertaining to economic history but, here goes: the GFC dates from 2007, not September 2008.
Oops.
C.L.
12 Mar 10 at 3:03 pm
Hey Homer:
Our interest rates never go to zero, you intellectual oaf. So under your definition of a credit crunch it, didn’t exist as interest rates never went to zero.
Honestly, you ought to be charged under the terror laws for committing intellectual terror round economics orientated websites.
As Pedro says. STFU you liar.
JC
12 Mar 10 at 3:04 pm
wrongly placed comma.
JC
12 Mar 10 at 3:06 pm
“The government was never worried about inflation in its second Budget only in its first. They thought the GFC would cause inflation to fall considerably.”
They were wrong. A 2-3% bias towards inflation creates mild inflation, it is not “the same as” negligible – low 0-1% inflation, as you have previously claimed.
“But it was in the 1988 RBA papers”
Maybe, but it turns out they were wrong as well.
Semi Regular Libertarian
12 Mar 10 at 3:08 pm
I have NEVER said we were in a liquidity trap.
We only experienced a credit crunch where monetary policy is impaired but still works.
CL your hide is as thick as a rhinoceros. You tried to attempt to portray SuperMac talking about the 1950/60s was the same as talking about the 19th century. you have no shame or understanding.
The government is worried about inflation in WHICH budget?
Whoops
Credit Crunch Forrest. We had a credit crunch when interest rates were NOT zero bound. They got there courtesy of the GFC.
you are an idiot pure and simple. you cannot even understand the rudimentary parts of economics but you still love to display your ignorance.Amazing
Butterfield, Bloomfield & Bishop
12 Mar 10 at 3:14 pm
“Liquidity trap anyone.”
“I have NEVER said we were in a liquidity trap.”
Que?
Semi Regular Libertarian
12 Mar 10 at 3:15 pm
err Mark the inflation forecasts in the first and then the second budget were????
you are awarded a golden Credit crunch Forrest award showing the typical research capability of catallaxians
Butterfield, Bloomfield & Bishop
12 Mar 10 at 3:16 pm
If we were NEVER in a liquidity trap why is deficit spending justified oh almighty Keynesian?
golly gee
jtfsoon
12 Mar 10 at 3:16 pm
“err Mark the inflation forecasts in the first and then the second budget were????
you are awarded a golden Credit crunch Forrest award showing the typical research capability of catallaxians”
Why are referring to budget forecasts?
Reality brought to bear this: Core and headline inflation well above the band for a considerable time when Chicken Littles feared bank failures due to illiquidity.
Chump.
Semi Regular Libertarian
12 Mar 10 at 3:20 pm
oh gee maybe
1) the credit crunch impairs monetary policy
2) the size of the economic catastrophe which was approaching
but wait for the trendy Eastern Suburbs dinner party you go to. I’m sure there will be a joke
Oh please Marky please please read. it isn’t addressed to the Australian situation
Butterfield, Bloomfield & Bishop
12 Mar 10 at 3:20 pm
“1) the credit crunch impairs monetary policy”
No. The capital market rose 1:1 with the rate cut, with a lag, of course.
2) the size of the economic catastrophe which was approaching
Which was what? The surplus would be wiped out, if anything. Well golly gee that sounds like the fruits of balancing the budget over the cycle.
Semi Regular Libertarian
12 Mar 10 at 3:21 pm
Mark’s research skills still top of the draw.
‘Inflation is forecast to continue to moderate over the forecast period, as the global recession eases previous demand pressures. Both headline and underlying inflation are expected to slow to 1¾ per cent through the year to the June quarter 2010, and 1½ per cent through the year to the June quarter 2011.’
do Catallaxians ever read actual papers at all
Butterfield, Bloomfield & Bishop
12 Mar 10 at 3:22 pm
I am merely picking up on your inconsistency given that you keep insisting True Keynesianism was only implemented by Adolf Hitler because stimuli are only justified when there is a liquidity trap.
you have said this numerous times.
so now you turn around and say we didn’t have a liquidity trap and yet Rudd is a True Keynesian.
whoops
jtfsoon
12 Mar 10 at 3:22 pm
..given you think 1950/60 is 1890.
Nobody has mentioned 1890, Homer. Rafe mentioned “circa 1900.” There was a depression in the 1890s – which apparently you’re unaware of. Australia was wealthier in real terms circa 1900 than it was after the dirigiste Settlement got fully underway. This was Rafe’s point. You claimed McFarlane scotched that idea by saying population was the only factor swinging prosperity our way circa 1900. McFarlane made no such claim in the Boyer lecture. He said the EXACT OPPOSITE about the role of population vis-a-vis prosperity – using the two periods comparatively. You bungled the whole subject from start to finish and verballed McFarlane.
You ought to be ashamed of yourself.
Let’s revisit Homer’s McFarlane bungle.
Rafe:
Homer:
I’ve found the transcript of McFarlane’s Boyer lecture. He said the exact opposite of what Homer attributed to him. He did not say economic growth dropped with population growth but, rather, that the only reason it was as high as it was is attributable to our unusually high rate of population growth.
Caught quote-doctoring, verballing McFarlane and outright lying.
C.L.
12 Mar 10 at 3:22 pm
Marky if monetary policy was working well then housing across the board would have risen just as an example as it did in the early 90s.
It didn’t. why?
Butterfield, Bloomfield & Bishop
12 Mar 10 at 3:23 pm
September 2008 was such an emergency that Rudd was still ruling out deficit spending two months later.
C.L.
12 Mar 10 at 3:24 pm
“Inflation is forecast…
“do Catallaxians ever read actual papers at all…
Actual inflation was much different to what was forecast, at least in 2009. It disproved your theory that a policy of 2-3% inflation was actually “0% inflation” Now you’re also taking the forecast out two years ahead of when the forecasts where shown to be rubbish.
Do you actually follow the real world?
Semi Regular Libertarian
12 Mar 10 at 3:25 pm
CL circa 1900 means what. We were top of the heap in the 1890s and third at Federation.
Super Mac doesn’t even address this at all.
you are making an even greater fool of yourself.
you have been belted out of the ring.
Accept it, go away and get someone to explain it you.
Butterfield, Bloomfield & Bishop
12 Mar 10 at 3:25 pm
…do Catallaxians ever read actual papers at all
Yea we do and more so now to catch your lies and dishonesty.
Every author in the world lives in wretched fear of you referencing them. You’re basically a terrorist in that regard, which is why you ought to be charged under the terror laws and slapped in solitary confinement.
The entire Amazon author list lives in total fear of you, Homer.
JC
12 Mar 10 at 3:25 pm
“Marky if monetary policy was working well then housing across the board would have risen just as an example as it did in the early 90s.
It didn’t. why?”
Yes. They. Have.
Rents have also risen. Whilst NSW lingers in recession, after receiving the most stimulus dollars.
Semi Regular Libertarian
12 Mar 10 at 3:26 pm
Marky go and find someone anyone who can explain to you what budget forecasts are about.
you are CLing yourself.
Butterfield, Bloomfield & Bishop
12 Mar 10 at 3:27 pm
No Homer you git you implied that “Supermac” didn’t understand capital accumulation, or that population growth cannot be an engine of economic growth.
I’m quite sure he’s more literate and enunciated on these matters than you.
Git.
Semi Regular Libertarian
12 Mar 10 at 3:27 pm
“Marky go and find someone anyone who can explain to you what budget forecasts are about.”
Forecasts and not necessarily the real data that precipitates in the real world?
Q.E.D.
Semi Regular Libertarian
12 Mar 10 at 3:28 pm
Homer the book/author terrorist says:
“Marky if monetary policy was working well then housing across the board would have risen just as an example as it did in the early 90s.
It didn’t. why?”
SRL says
“Yes. They. Have.”
The only house that hasn’t gone up is homer’s.
JC
12 Mar 10 at 3:29 pm
Statman I have never said Rudd was a true Keynesian.
you were imbibing too much wine at the dinner party.
Indeed I actually did say the Stimulus wasn’t Keynesian.
wow you are credit crunching Forrest yourself.keep going.
Mark do you actually understand what an increase across the board in housing means?
It didn’t just happen recently. It almost all First home buyers. This is very unusual.
A person who thinks would cogitate on that.
Butterfield, Bloomfield & Bishop
12 Mar 10 at 3:32 pm
No twit, you were wrong about why Income per capita was so high in the 19th Century.
you did not even want to understand why I gave the example of Saudi Arabia. He gave Kuwait.
Butterfield, Bloomfield & Bishop
12 Mar 10 at 3:34 pm
let’s break this down now Homer
1) The premise behind all your pronouncements on economic policy is that deficits are only justified according to Keynesian principles
2) you now concede that Rudd didn’t follow Keynesian principles in deploying his stimulus
3) yet you continue to defend the stimulus
whoops
jtfsoon
12 Mar 10 at 3:34 pm
As he runs back behind the garage again peering around the corner to see if the coast is clear.
It’s not Homer, we’re all here and we can see you clearly behind the bushes.
JC
12 Mar 10 at 3:37 pm
So,
1. We had a credit crunch.
2. No we didn’t!
3. Thus we need Keynesian policy.
4. But iot wasn’t Keynesian policy!
5. You guys are such kidders – criticising that highly successful Keynesian policy!
6. Who cares what the results are? They weren’t forecast in the MYEFO!
7. The RBA ended all loans with an LVR greater than 95%.
8. No they didn’t!
9. There hasn’t been any real estate asset appreciation.
10. Yes there was!
11. “It almost all First home buyers.”
12. Seriously now – Homer doesn’t realise that properties, and thus rents have risen, and needing extra finance after the FHOBG has been wound down, new entrants seek 100-110% finance etc. Which of course contradicts his 7.
Semi Regular Libertarian
12 Mar 10 at 3:37 pm
13. “No twit, you were wrong about why Income per capita was so high in the 19th Century.”
i.e, capital accumulation does not increase human welfare. Apparently.
Semi Regular Libertarian
12 Mar 10 at 3:38 pm
No Statman,
I said if a person was a Keynesian then only times when a liquidity trap made monetary policy impotent would be when one used fiscal policy.
I am perfectly happy to use fiscal policy in addition to that when an economic catastrophe is coming and a credit crunch impairs monetary policy.
now for Marky.
we had a credit crunch recently. This is the first one we have experienced. It didn’t happened in the 1990s.
That is apart of Forrest’s idiocy.
no we didn’t need Keynesian policy .see above
Yes the RBA ensured no banks did not have loans of over 95% when some got to over 100% however these were equivalent to prime loans.
you are confusing a rise in housing activity with asst prices. Two different things.
Just recently it was strongly led by FHB, however it was across the board in the early 90s.
The reason inflation did not fall as forecast is GDP did not fall as forecast because of the er stimulus!
The reason why we had such a whipping large income per capita was the low population.
Hence the expression Kuwait of the 1890s.
Resources are a given.
If you have a given level of resources and a low population you will have a higher income per capita than if you had double the population.
Butterfield, Bloomfield & Bishop
12 Mar 10 at 4:20 pm
“I said if a person was a Keynesian then only times when a liquidity trap made monetary policy impotent would be when one used fiscal policy.
I am perfectly happy to use fiscal policy in addition to that when an economic catastrophe is coming and a credit crunch impairs monetary policy.”
Wretched duplicity.
“That is apart of Forrest’s idiocy.”
??? Given I have a greater command of the English language, I have spoken to bankers and they say a similar thing to JC. Also note asset apreciation in the 1990s was actually quite slow.
“Yes the RBA ensured no banks did not have loans of over 95% when some got to over 100% however these were equivalent to prime loans.”
Please cite the regulation. Recent industry information is that 100%+ financing has grown markedly in recent months.
“you are confusing a rise in housing activity with asst prices. Two different things.”
???
No, we have a squeeze on housing as demographics change but we have artifical supply side restrictions. We have a very slowly growing population, but the number of households has and will continue to grow until all baby boomers have offloaded their children. This is a general trend, along with monetary inflation which we are systematically biased to.
“Just recently it was strongly led by FHB, however it was across the board in the early 90s.”
It doesn’t matter where it is led from – resources still get bidded up.
“The reason inflation did not fall as forecast is GDP did not fall as forecast because of the er stimulus!”
Partly. It’s also nothing to celebrate.
“The reason why we had such a whipping large income per capita was the low population.”
No. That is never a reason in itself – “low population”. Utter freaking rubbish. Just as you cannot cut cloth with one scissor blade, the capital intensity relationship relies on the amount of capital relative to the population.
Not “low population”.
“If you have a given level of resources and a low population you will have a higher income per capita than if you had double the population.”
It’s amazing that can come halfway to sensible economics – but don’t understand the K/L ratio.
Resources are not given, actually. They are worthless until capital is applied to it/them.
Semi Regular Libertarian
12 Mar 10 at 4:34 pm
Homer surrenders at last:
Homer then:
Homer now:
Right at last. He didn’t even address it. What he did say about population and prosperity in relation to the two periods, comparatively, was 100 percent OPPOSITE to what you said he said.
C.L.
12 Mar 10 at 5:10 pm
“The reason why we had such a whipping large income per capita was the low population.”
I guess that’s why they’re so rich in Kiribati.
http://en.wikipedia.org/wiki/Kiribati
But please describe the resources that underpinning our economy(s) in the 1890s.
Pedro
12 Mar 10 at 6:16 pm
SRL
Sorry to pull you up but population growth elevated, not slow.
I’m not sure why you are arguing there was no credit crunch in the RBA engaged in QE. Aside from whether the RBA can be said to have engaged in QE or not, why do you suppose the RBA engaged in such a level of market support? Credit spreads blew out to astronomical levels, this alone suggests the market was in the midst of a credit crunch. We are just fortunate that RBA action and the federal government guarantee of ADI wholesale debt helped us through what was hopefully a once in a lifetime event.
sdfc
12 Mar 10 at 7:59 pm
Sinclair, this is what i wrote in about May 2009: http://www.onlineopinion.com.au/view.asp?article=9406
It’s not the stimulus that is dangerous in so much as what policies might do to the NAIRU in the medium term. Specifically, as a result of certain re-regulations, will we see the NAIRU rise, probably.
In my view there is also a lot of underutilisation so an unemployment of 5.3% now is not anywhere near as boyant as the labour market in early 2007. It will be interesting to see with FWA if those underutilised are taken back to the levels of utilisation that were seen previously without inflation or much higher interest rates being needed.
Corin
12 Mar 10 at 10:08 pm
“Sorry to pull you up but population growth elevated, not slow.”
A small year on year change doesn’t change the long term trend or the changes between demographics, which matter more.
“I’m not sure why you are arguing there was no credit crunch in the RBA engaged in QE.”
We’re not. Homer is and he got snooty about calling it QE, since the rates weren’t actually zero.
“guarantee of ADI wholesale debt”
I bet there are some small funds that beg to differ.
Semi Regular Libertarian
12 Mar 10 at 10:51 pm