Amongst the five things necessary to get the economy going was the recommendation to cut spending, which of course means cut government spending. But in a world of Y=C+I+G why would any government cut its own expenditure since it will only lower GDP and employment. And, of course, in a world of Y=C+I+G no government would.
But as it happens, the world is not made up of Y=C+I+G and cutting public spending does not lower growth and employment. But to know why that is requires a transit from modern macro, which is Keynesian through and through, and a return to classical economic theory and most particularly, to an understanding that it is only value-adding activities – that is, economic activities that pay for themselves with the revenues they themselves earn – that actually give you economic growth and employment. Governments don't do that past the first 10-20% even of their supposed investment outlays [although there is no doubt they do some]. Nor do loss making firms such as our car companies. Transitions are painful, but why carry such deadweight losses that only slow you down? Let some other government subsidise the cars we buy while we get on and do other more value-adding forms of production.
The rising unemployment we see now is not because of our new government but is the carryover from the dead hand of Labor's economic management. Now it is up to this government to take up the program so nicely laid out for it by Sinclair. What I always admired most about Peter Costello was how he ignored the advice of his Treasury to spend more and instead hacked into spending. Hopefully, our new government has learned from its predecessor and especially how to ignore Treasury which is filled with people who actually still think the stimulus was a good idea.