The debate over whether December’s now unfashionable stimulus package worked is now over, at least as far as the Government is concerned. It has rejected calls — primarily, indeed pretty much only, from the Opposition and its cheerleaders — to bring forward permanent tax cuts, in favour of another round of handouts and a construction-led jobs package.

The handouts this time are bigger — $12.7 billion — and pitched at an entirely different group — low and middle income taxpayers, primarily those earning less than $100,000 and those receiving Family Tax Benefits A and B. Or, to use economists’ jargon, “liquidity-constrained households” — the type who might be more inclined to spend it than save it. The jibes about plasmas ’n’ pokies won’t be so hard to make this time, but those outside the retail sector who wonder about the benefit of the last round will find much to complain about.

The other part of the package mainly kicks in from July, although it’ll get going immediately, and a lazy billion in school infrastructure funding will have already gone out by June. For all the talk of infrastructure constraints and the need for new roads, ports, power grids and mass transit to fix urban transport, the Government has firmly fixed its infrastructure sights on a State Government responsibility — schools.

This fits neatly with the Government’s Education Revolution rhetoric — in fact the measure is prosaically called “Building the Education Revolution” — and it will strike a chord with most parents whose children don’t attend wealthy schools and can see where their kids’ schools need new carpets, better facilities or more permanent classrooms. Such projects can also be ramped up very quickly. Every principal in the country would have a list of works he or she would like to start if they had the money.

Whether it yields the most in terms of economic stimulus or long-term educational and economic benefits compared to other forms of infrastructure investment, however, is debatable, at least outside the Education Revolutionaries.

The $3.9 billion in funding for insulation and solar hot water rebates is sensible and a good start, although if someone could devise a way of weaning Australians off their beloved aircon, that’d be far better. The Government is arguing the CO2 impacts of the insulation measure will be equivalent to taking a million cars a year off the road. But there was a disappointing absence of measures to support business energy efficiency, which would’ve generated a similar stimulus benefit and potentially significant efficiencies.

In fact there’s very little at all for business in the package, beyond an investment tax break for small business, and retailers hoping those handouts make their way into their cash registers. Its primary targets are Rudd’s core constituencies and concerns: the ill-defined “working families”, education, housing. Criticism of the package will become criticism of taxpayers, of our schools and the right to a decent home. The Opposition, which has painted itself into a corner backing tax cuts uber alles, has to either take those on or look even more confused than it already does.

This is stimulus à la Rudd.

Peter Fray

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Peter Fray
Editor-in-chief of Crikey