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Stimulus package

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Toots Hibbert said:
..... I just thought what the hell am I doing seeking financial advice on a footy board. ....
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What better place to get it? After all we are all experts. :p

(Well at least REH seems to know what he is talking about)

I am amazed at the type of medical advice some people seek on another sports related forum I visit.

missionpossible said:
.... basically taught myself how to write in year 12 and university. .....
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No wonder teachers want a 21% pay rise.
 

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Ebert80 said:
Does anyone know how a HECS debt might affect these payments?
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What does a HECS debt have anything to do with the 5 payments the government will make?

• Tax Bonus for Working Australians of up to $950 paid to every eligible Australian worker earning $100,000 or less. This will support up to 8.7 million individuals.

A HECS debt wouldn't have changed your 2007-08 taxable income or primary tax therefore no effect. This amount will be paid based on 2007-08 taxable income.

• $950 Single Income Family Bonus to support 1.5 million families with one main income earner.

A HECS debt has nothing to do with one parent getting Family Tax Benefit part B payments.

• $950 Farmer's Hardship Bonus paid to around 21,500 drought affected farmers and farm dependent small business owners receiving exceptional circumstances related income support.

A HECS debt has nothing to do with Farmer's hardship

• $950 per child Back to School Bonus to support 2.8 million children from low- and middle-income families.

A Hecs debt has nothing to do with having a child between 4 to 18 and if you are getting a Family Tax Benefit part A payments for that child.

• $950 Training and Learning Bonus paid to students and people outside of the workforce returning to study to help with the costs of education and training.

A Hecs debt has nothing to do with going back to study. As I posted above there are some provisions to say if you are getting other government payments these wont effect by this $950 bonus.

Hope that helps.
 
Thanks REH

I overhead someone at work mention something about a HECS debt complicating things so thats why i was curious.
 
FishingRick04 said:
Personally I find tax cuts deliver little to small and middle income earners as the increased amount is hardly noticable and it's power can be diminished, however a lump sum does allow some people to use that money to make an impact. Each to their own though.
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Although I got $2k from the last one (with two kids) and will be getting $1900 this time (FTB B plus earn less then $100k) and won't be making some useless refusal of what's coming my way this time, this is more pissing up against a wall.

FOHG - the problem is housing affordability - so lets put an artificial floor under the price, wasting billions. To make housing affordable let the prices drop (and yes I'm paying a mortgage so it would hurt me).
Cash grants - push bad growth figures out a quarter or two at best, whilst wasting billions.

Tax cuts on the other hand - people make PERMANENT spending changes based on permanent changes in income, which tax cuts deliver. Ditto businesses may give staff a few extra shifts to handle any short term grant splurge (though the billions put through pokies and bottleshops probably didn't even require that) - but no employer with a brain is going to hire new permanent staff based on a short term fix. If it was tax cuts and they could think there's more money permanently in circulation then I can permanently put someone on.

START RANT
It's a pity Rudd and Swan are fixated on Kenysian pump priming and the false belief that FDR's New Deal cushioned the great depression (or look to Japan's actions in the 90's similar to Rudd/Swan for how to go nowhere except further into debt) rather then extending and worsening it.

Yes there are/were flaws in the free market, but the root cause of the sub-prime collapse was the US Democrats effectively forcing banks there to lend to people who should never have gotten loans (with no recourse if they couldn't pay unlike here), as 'Everyone should have the right to a home'. Political correctness that some demographics weren't enjoying high home ownership rates, and their ability as to whether said demographic groups could ever afford it be damned has screwed us all over. Yes, there were other causes - greed amonst Wall St., lack of transparency of complex products (a failure of governments worldwide) and greed by everyone (including here in Aus.) who redrew on their home loans or used cheap credit to live the plasma tv/new car/holiday lifestyle as their 'right', but dodgy PC interference in the market rather then the market left to it's own devices was the main cause

/END RANT.
 
Andre said:
Although I got $2k from the last one (with two kids) and will be getting $1900 this time (FTB B plus earn less then $100k) and won't be making some useless refusal of what's coming my way this time, this is more pissing up against a wall.

FOHG - the problem is housing affordability - so lets put an artificial floor under the price, wasting billions. To make housing affordable let the prices drop (and yes I'm paying a mortgage so it would hurt me).
Cash grants - push bad growth figures out a quarter or two at best, whilst wasting billions.

Tax cuts on the other hand - people make PERMANENT spending changes based on permanent changes in income, which tax cuts deliver. Ditto businesses may give staff a few extra shifts to handle any short term grant splurge (though the billions put through pokies and bottleshops probably didn't even require that) - but no employer with a brain is going to hire new permanent staff based on a short term fix. If it was tax cuts and they could think there's more money permanently in circulation then I can permanently put someone on.

START RANT
It's a pity Rudd and Swan are fixated on Kenysian pump priming and the false belief that FDR's New Deal cushioned the great depression (or look to Japan's actions in the 90's similar to Rudd/Swan for how to go nowhere except further into debt) rather then extending and worsening it.

Yes there are/were flaws in the free market, but the root cause of the sub-prime collapse was the US Democrats effectively forcing banks there to lend to people who should never have gotten loans (with no recourse if they couldn't pay unlike here), as 'Everyone should have the right to a home'. Political correctness that some demographics weren't enjoying high home ownership rates, and their ability as to whether said demographic groups could ever afford it be damned has screwed us all over. Yes, there were other causes - greed amonst Wall St., lack of transparency of complex products (a failure of governments worldwide) and greed by everyone (including here in Aus.) who redrew on their home loans or used cheap credit to live the plasma tv/new car/holiday lifestyle as their 'right', but dodgy PC interference in the market rather then the market left to it's own devices was the main cause

/END RANT.
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I agree, my wife runs 2 retail shops and it would mean little, but I guess the government see it's as a quick fix to keep the economy rolling. I guess they know best what the effects are.

As for housing you are right, there was an article on news.com.au that said australias housing is way over priced. Adelaide is higher than NY based on medium salaries!

Look at all the tax revenue lost if property values drop, land tax, council rates, stamp duties, heaven forbid!

Why we still have stamp duty is beyong me anyway, it was supposed to go with GST! Talk about entry barriers!
 
whilst I like the idea of being given some cash, my biggest concern is how is the government going to get this money back in the long term. If we are still in deficit by the next election I'd say it's curtains for him. For 10 years the liberals gave little to nothing back to middle income earners now labour is in we get something but i fear at a cost. I'm not big on politics and don't like to debate about things i know little on I let my wife tell me about the polititcal things, all i know is arguing is pointless as no government has ever pleased the majority of the population.
 
MannumPower said:
whilst I like the idea of being given some cash, my biggest concern is how is the government going to get this money back in the long term. If we are still in deficit by the next election I'd say it's curtains for him. For 10 years the liberals gave little to nothing back to middle income earners now labour is in we get something but i fear at a cost. I'm not big on politics and don't like to debate about things i know little on I let my wife tell me about the polititcal things, all i know is arguing is pointless as no government has ever pleased the majority of the population.
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How did the lib's get their surpluses thats the question?
 
wharfie_1870 said:
According to Paul Keating on Lateline on Monday night they got it from the good work that the Hawke and Keating governments did.
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Yeah saw him on Monday and Costello on Tuesday. If you take out Keating's back slapping and no credit to Costello, it actually was a sobering assessment. The threat of USA sovereign debt default is pretty real if they don't change things in the next few years. You can't continue to have huge budget deficits at 15% of GDP as proposed for the next few years, accumulated government debt which will be more than 100% of GDP in a couple of years time and run annual current account deficits of $700bil +. At some point if US treasury paper losses value then why would the Chinese, Japanese, Koreans, Oil nations continue to buy it? The big Geo-political-financial shift in world power is well under way. This will just accelerate it.

I though his call that if it took the Japanese 14 years to get out of their recession after asset price bubble burst in 1989, that it would take the USA 6 or 7 years to get out of theirs as a pretty fair call.

Watching Costello on Tuesday it looked to me that if the economy is in the toilet by the end of the year he might well have a crack at the liberal leadership and becoming PM. It was a masterful display and even entertaining at times. I like his call of the Rudd'd hypocrisy of Gillard being in Davos and saying we had the best regulatory system in the OECD and then Rudd saying neoliberalism and the changes of the last 30 years is dead. As Costello said his APRA reforms of creating a super regulator strengthened our system, and why now our 4 big banks are in top 20 in the world for market capitalisation and prudential rankings, but the current government wont even acknowledge the previous governments good work.
 

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What with land tax assessment, emergency services levy and maybe a bit left over for a speeding fine if I'm feeling a bit lead-footed, I should be able to spend that money easily. That should get the economy jump-started. ;)
 
The enormity of the world "downturn" is being grossly down-played by those who are directly responsible for the greatest crisis to have befallen capitalism.
Growth has "fallen off a cliff", to quote someone on Lateline last night and for Turnbull to go around behaving and giving the impression that this is just a blip on the horizon is disgraceful.
It is Turnbull and his banking mates and all those pigs who have never done a day's productive work in their lives, that have plunged the world into an all encompassing depression. Now these lords are trying to dupe us into believing that Tax Cuts are all we need to "ride out" this "downturn".
Australians vowed that the depression of the late 1920's - early 1930's would never happen again and if there was a world wide depression again, it would never have the effect on Australians as those tragic times of the past.
It took a whole two years before the government's at that time did anything at all and then they were opposed and thwarted at every turn by Sir Robert Gibson, chairman of the board of directors of the Commonwealth Bank of Australia and by Sir Otto Niemeyer of the Bank of England in London.
These two chaps refused to allow any money to be made available to Australian Governments and seriously limited the freedom of choice open to the Scullin government to help the mass suffering that was going on in this country.
Sirs Gibson and Niemeyer, adhered rigidly to the "orthodox" banking view that rigorous reductions in loans of all kinds and restrictions on public and private expenditure by all possible means would "contain" the situation until world prices for primary produce began to rise again - in other words, who gives a toss about the plebs, those that aren't of our kind !
The same thing that happened then is what the discredited neo-liberals want to happen again.
It would be interesting to get the views of people who have read Rudd's essay, "The GLOBAL FINANCIAL CRISIS" that was published in "The Monthly".
 
MannumPower said:
every time i hear "Stimulus Package" I have a mental image of Kevin Rudd wearing speedos and doing pelvic thrusts as he talks about it :eek:
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...to the tune of "Pull up to the bumper", by Grace Jones.

Although I can't imagine Rudd with a "long black limousine", more like a faded Datsun 120Y.
 
bomberclifford said:
...to the tune of "Pull up to the bumper", by Grace Jones.

Although I can't imagine Rudd with a "long black limousine", more like a faded Datsun 120Y.
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i was thinking the song would be from the "Mr Sheen" add

Mr-Sheen-POS_sml.gif
 

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These are the times that Keynesian economic philosophies are embraced, so here's a link to an article on Keynes, the nature of his response in times of economic recession and the broader applicability of his economic philosophy.

A Man for All Seasons

The misunderstood John Maynard Keynes.

John B. Judis, The New Republic Published: Wednesday, February 04, 2009

When the economy goes south, one name invariably surfaces on the lips of pundits and economists: John Maynard Keynes. That is because the twentieth century's greatest economist is generally associated with the idea that markets require government intervention in order to function properly. During boom times, when the market seems to be working, no one has any use for Keynes's skepticism toward unrestrained capitalism. But, during recessions--when the economy grinds to a halt and Washington suddenly looks like the only thing that can save it--Keynes invariably enjoys a revival. The current economic crisis, our country's worst since the Great Depression, is no exception. Everyone, it seems, has spent the past months rediscovering Keynes.

Full article here.
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its odd, that Keynes has been widely discredited over the recent couple of decades, that they would turn to him now. I suspect that's why some of the actions haven't been so effective.

let me dig out an article...
 
Keynes can't help us now

Governments cling to the delusion that a crisis of excess debt can be solved by creating more debt.

Niall Ferguson

February 6, 2009

It began as a subprime surprise, became a credit crunch and then a global financial crisis. At last week's World Economic Forum in Davos, Switzerland, Russia and China blamed America, everyone blamed the bankers, and the bankers blamed you and me. From where I sat, the majority of the attendees were stuck in the Great Repression: deeply anxious but fundamentally in denial about the nature and magnitude of the problem.

Some foretold the bottom of the recession by the middle of this year. Others claimed that India and China would be the engines of recovery. But mostly the wise and powerful had decided to trust that John Maynard Keynes would save us all.

I heard almost no criticism of the $819-billion stimulus package making its way through Congress. The general assumption seemed to be that practically any kind of government expenditure would be beneficial -- and the bigger the resulting deficit the better.

There is something desperate about the way economists are clinging to their dogeared copies of Keynes' "General Theory." Uneasily aware that their discipline almost entirely failed to anticipate the current crisis, they seem to be regressing to macroeconomic childhood, clutching the Keynesian "multiplier effect" -- which holds that a dollar spent by the government begets more than a dollar's worth of additional economic output -- like an old teddy bear.

They need to grow up and face the harsh reality: The Western world is suffering a crisis of excessive indebtedness. Governments, corporations and households are groaning under unprecedented debt burdens. Average household debt has reached 141% of disposable income in the United States and 177% in Britain. Worst of all are the banks. Some of the best-known names in American and European finance have liabilities 40, 60 or even 100 times the amount of their capital.

The delusion that a crisis of excess debt can be solved by creating more debt is at the heart of the Great Repression. Yet that is precisely what most governments propose to do.

The United States could end up running a deficit of more than 10% of GDP this year (adding the cost of the stimulus package to the Congressional Budget Office's optimistic 8.3% forecast). Nor is that all. Last year, the Bush administration committed $7.8 trillion to bailout schemes, in the form of loans, investments and guarantees.

Now the talk is of a new "bad bank" to buy the toxic assets that the Troubled Asset Relief Program couldn't cure. No one seems to have noticed that there already is a "bad bank." It is called the Federal Reserve System, and its balance sheet has grown from just over $900 billion to more than $2 trillion since this crisis began, partly as a result of purchases of undisclosed assets from banks.

Just how much more toxic waste is out there? New York University economistNouriel Roubini puts U.S. banks' projected losses from bad loans and securities at $1.8 trillion. Even if that estimate is 40% too high, the banks' capital will still be wiped out. And all this is before any account is taken of the unfunded liabilities of the Medicare and Social Security systems. With the economy contracting at a fast clip, we are on the eve of a public-debt explosion. And similar measures are being taken around the world.

The born-again Keynesians seem to have forgotten that their prescription stood the best chance of working in a more or less closed economy. But this is a globalized world, where uncoordinated profligacy by national governments is more likely to generate bond-market and currency-market volatility than a return to growth.

There is a better way to go: in the opposite direction. The aim must be not to increase debt but to reduce it.

This used to happen in one of two ways. If, say, Argentina had an excessively large domestic debt, denominated in Argentine currency, it could be inflated away -- Argentina just printed more money. If it were an external debt, the government defaulted and forced the creditors to accept less.

Today, America is Argentina. Europe is Argentina. Former investment banks and ordinary households are Argentina. But it will not be so easy for us to inflate away our debts. The deflationary pressures unleashed by the financial crisis are too strong -- consumer prices in the U.S. have been falling for three consecutive months. Nor is default quite the same for banks and households as it is for governments. Understandably, monetary authorities are anxious to avoid mass bankruptcies of banks and households, not least because of the downward spiral caused by distress sales.

So what can we do? First, banks that are de facto insolvent need to be restructured, not nationalized.(The last thing the U.S. needs is to have all of its banks run like Amtrak or, worse, the IRS.) Bank shareholders will have to face that they have lost their money. Too bad; they should have kept a more vigilant eye on the people running their banks. Government will take control in return for a substantial recapitalization, but only after losses have been meaningfully written down. Those who hold the banks' debt, the bondholders, may have to accept a debt-for-equity swap or a 20% "haircut" -- a disappointment, but nothing compared with the losses suffered when Lehman Bros. went under.

State life-support for dinosaur banks should not and must not impede the formation of new banks by the private sector. It is vital that state control does not give the old, moribund banks an unfair advantage. So recapitalization must be a once-only event, with no enduring government guarantees or subsidies. And there should be a clear timetable for "re-privatization" -- within, say, 10 years.

The second step we must take is a generalized conversion of American mortgages to lower interest rates and longer maturities. About 2.3 million U.S. households face foreclosure. That number is certain to rise as more adjustable-rate mortgages reset, driving perhaps 8 million more households into foreclosure and causing home prices to drop further. Few of those affected have any realistic prospect of refinancing at more affordable rates. So, once again, what is needed is state intervention.

Purists say this would violate the sanctity of the contract. But there are times when the public interest requires us to honor the rule of law in the breach. Repeatedly in the course of the 19th century, governments changed the terms of bonds that they issued through a process known as "conversion." A bond with a 5% return was simply exchanged for one with a 3% return, to take account of falling market rates and prices. Such procedures were seldom stigmatized as default.

Another objection to such a procedure is that it would reward the imprudent. But moral hazard only really matters if bad behavior is likely to be repeated, and risky adjustable-rate mortgages aren't coming back soon.

The issue, then, becomes one of fairness: Why help the imprudent when the prudent are struggling too?

One solution would be for the government-controlled mortgage lenders and guarantors, Fannie Mae and Freddie Mac, to offer all borrowers -- including those with fixed rates -- the same deal. Permanently lower monthly payments for a majority of U.S. households almost certainly would do more to stimulate consumer confidence than all the provisions of the stimulus package, including tax cuts.

No doubt those who lost by such measures would not suffer in silence. But the benefits would surely outweigh the costs to bank shareholders, bank bondholders and the owners of mortgage-backed securities.

Americans, Winston Churchill once remarked, will always do the right thing -- after they have exhausted all other alternatives. If we are still waiting for Keynes to save us when Davos comes around next year, it may well be too late. Only a Great Restructuring can end the Great Repression. It needs to happen soon.


Niall Ferguson is a professor at Harvard University and Harvard Business School, a Fellow of Jesus College, Oxford, and a senior fellow of the Hoover Institution. His latest book is "The Ascent of Money: A Financial History of the World."
 

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