Yesterday, Lateral Economics released a piece of research that looked at some of the dynamics of the stimulus package as it flowed through the economy — particularly in terms of how that stimulus generated tax receipts for the government through the employment it supported, employment that wouldn’t have otherwise existed without the stimulus package.
It’s not surprising that government expenditure does this BTW — for every additional dollar’s worth of production that occurs across the Australian economy, the government takes on average, somewhere about 25 cents of that through tax. In terms of where that initial dollar’s worth of production originally came from is neither here nor there when it comes to the economic effects of that additional dollar on the ground at the time — after all, a dollar a dollar is a dollar.
Where the origin of that dollar does comes into play, however, is when we move to the real debate on the stimulus (as opposed to the juvenile rubbish we see served up in a certain broadsheet) where we know that the stimulus had economic costs and benefits — where the fundamental question is simple:
Were the total benefits of debt-funded stimulus greater than or less than the total costs of that debt-funded stimulus?
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This piece of Lateral Economics research looks at one part of the total cost side of that question — how the total size of the stimulus debt needing to be repaid was effectively lowered as a result of the increase in tax receipts the stimulus generated through supporting employment. In other words, it estimates how much of the stimulus package effectively funded itself through 2008/9 and 2009/10.
So, how much was it?
Lateral Economics suggests that it was in the vicinity of $16 billion.