So did it or didn’t it? Can’t someone say definitively, once and for all, if the Rudd government’s stimulus package kept Australia out of a major recession?
In the left corner last week we had the heavyweight Nobel Prize laureate and Columbia University professor Joseph Stiglitz, who says:
“You were lucky to have, probably, the best designed stimulus package of any of the countries, advanced industrial countries, both in size and in design, timing and how it was spent — and I think it served Australia well.”
Marshalling the counter-argument from the right corner today is British historian and Harvard professor Niall Ferguson, who writes in The Australian the most plausible explanations for Australia’s relative outperformance were luck, the economic legacy left by the Howard government, the actions of the Reserve Bank, the strength of China and the success of the mining industry.
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“Labor has stimulated the Australian economy,” writes Ferguson, “in the same way that Ned Kelly used to stimulate the economy of Victoria.”
Supporting Ferguson, also in today’s Australian, is Reserve Bank director and ANU economist Professor Warwick McKibbin, who rejects Labor’s claim that its stimulus spending saved 200,000 jobs from being lost.
“The role of fiscal policy was relatively small; that doesn’t mean it wasn’t important, but it could not have been responsible for creating 200,000 jobs… It was never going to be spent very effectively and the nature of the spending was not such that it could be rolled out quickly. Nor could it be changed if the forecasts were wrong, which they were.”
Far be it for us to attempt to mix it with the likes of Professors from Columbia, Harvard or even ANU.
But perhaps, just perhaps, there was another force at play when the Australian government decided to act quickly and decisively with a huge fiscal injection — confidence. The message of confidence such an intervention sent to Australians, especially Australian employers, that their government was prepared to use extraordinary boldness at a time of crisis.