Australia to miss recession

[Jovial Monk]

From ABC website:

Inflation falls to within RBA's target range Video Audio Photo

By finance reporter Rebecca Hyam

The annual rate of inflation has fallen within the Reserve Bank's target range for the first time in three years.

The Consumer Price Index (CPI) has fallen to 2.5 per cent, down from the previous annual rate of 3.7 per cent.

So no stagflation and therefore no need for high interest rates. Getting close to zero and the dreaded deflation, kind of.

Ruddy wants another stimulus package (and so he should) and a scheme to send floodwaters, or what would be floodwaters, from Qld down the MD. Another way to increase MD flows, acquire Cubby and a few similar cotton farms, release most of their water down the Darling and pay the unemployed to plant native trees all around the headwaters of the Darling: believe it or not that would increase rainfall! Apparently native vegetation is darker than crops and trees respire etc.

[Jovial Monk]

Glad I am that our successful stimulus packages will keep the dreaded bogey of deflation away from our shores!

Go Rudd, Swan, Tanner, Bowen!

Are you sure? Surely if deflation is on its way then there would be no stopping it unless consumers and banks feel that there is social optimism in the air and start to spend, borrow and lend again? I don't see how a one-off $900 handout would create that optimism? My cousin went for a home loan inquiry the other day and was given a list of demands needed to meet the citeria - much more tougher than a few years ago.

Don't have a go at me. I'm no expert on this. Just wondering how it would work.

Not having a go at you at all.

The handouts (orig $10Bn and the tax rebates in the second) are not the only part of the stimulus packages. Ther is work proceeding in rural councils, in schools and soon on the NBN and the whole COAG infrastructure spending will kicks in--major programs take much longer to kick in, years or surveying, property acquisitions, soil/geological testing, quantity estimates made etc before major road tunnels, bridges etc can be built.

The other part of the first package was the first home owners grant (existing and new homes) which is keeping house prices higher than if suddenly no one was buying/building and is keeping realtors and builders etc busy (and white goods, landscaping etc etc. They can't artificially keep house prices high but they can ensure prices retreat in some orderly fashion, not a panic inducing sudden plunge!

You are right that consumers (and, subsequently, business) is not spending enough and that is precisely why the government has to step in and keep useful spending going. It provides a cushion to soften the blow but cannot be a shield to protect us completely (look at lefty's "Resourceville Blues" thread how mining companies have been hit hard by China buying less minerals and at a much lower price.)

[Jovial Monk]

Swan--genius!

This is from Peter Martin's blog:

But it contained one element of genius. Wayne Swan had returned from a meeting with his United States counterparts shaken by what he had heard. Late in the day he decided to take out insurance against a collapse in the world's biggest economy by making the budget cuts more gentle than had been planned. The Treasurer's foresight helped delay the onset of Australia's recession.

You may remember at the time economists saying the budget cuts promised were going to be tough yet in the end were quite mild. You may also remember reading economists bewailing the fact that the promised tax cuts were paid and paid in cash: some later admitted they were wrong and Swan right.

Ladies and gentlemen, finally a real Treasurer is in the house!