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Is it time for a Rudd-style stimulus package?
A think tank has called for the government to unleash a Rudd-style fiscal stimulus, as withdrawing government support now could further damage the economy.
Is it time for a Rudd-style stimulus package?
A think tank has called for the government to unleash a Rudd-style fiscal stimulus, as withdrawing government support now could further damage the economy.
The Blueprint Institute wants the government to immediately distribute $1,000 to every adult in Australia who has an income of less than $100,000 for the 2019-20 financial year, plus $500 for each dependent.
Under the plan, another $750 would be distributed to the one in four Australians receiving government assistance, costing the treasury department $4 billion.
“These payments, targeted at lower-income households, would significantly stimulate aggregate demand,” Harry Guinness, CEO and co-founder of Blueprint Institute, said.
“The Treasurer’s announcement that the government may begin cutting spending or raising taxes once unemployment reaches 6 per cent is premature and has the potential to threaten the recovery. But we can and should be prudent with further stimulus, allocating resources to the areas most likely to boost activity, provide additional social benefits and minimise waste.”
The think tank also called for personal income tax cuts to be brought forward and the extension of the instant asset write-off scheme through to 30 June 2021, as well as strengthening “medium-term fiscal discipline” through tax reform.
“A ratcheting up of net debt over time would pose a risk to financing critical spending during a future crisis,” Blueprint said.
“Even if that risk is remote, its consequences would be so dire that we must take it seriously. Past prudence (alongside a good dose of luck) paid dividends in the last two crises – future discipline will be needed to confront the crises that lie ahead.”
To that end, the think tank also wants to formally separate economic forecasting from the political process, as is the case in the UK, in order to avoid the politicisation of debt and deficits that could “constrain the government during a crisis”.
“The government must re-establish a rigorous and independent Intergenerational Report,” the think tank said.
“The report was due to be released in June 2020, but has been delayed indefinitely. We cannot allow a short-term crisis to distract us from addressing longer-term structural challenges.”
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