A new Melbourne Institute study asks this question and finds an intriguing answer:
In December 2008 and March-April 2009 the Australian Government used fiscal stimulus as a short-run economic stabilization tool for the first time since the 1990s. In May-June 2012, households received lump sum cheques as compensation for the introduction of the Carbon Tax scheduled for 1 July 2012. This paper examines the relationship between these financial windfalls and spending at electronic gaming machines (EGMs) using data from 62 local government areas in Victoria, Australia. The results show large increases in spending at EGMs during the periods when Australian households received economic stimulus cheques. Increased spending at EGMs in December 2008 amounted to 1% of the total stimulus for that period. We conclude that the 2008-2009 stimulus packages substantially increased gambling at EGMs in Victoria. We find no unexpected increase in spending at EGMs in the months when Carbon Tax compensation cheques were paid.
So, it seems that the nature of the cheque may also play a role. A clearly delineated stimulus cheque is spent in the way it is intended. A different kind of cheque may be valued differently. I have long suspected that despite the whinging Australians are the most conformist people on earth.
That is not to say that the carbon rebate cheque wasn’t spent. It was. Check out the retail sales bounce:
Perhaps we all bought more efficient appliances?
Full report below.
I noticed Aristocrat Leisure surged 70% over the last 18 months. Investors clearly think so.
Now there’s a long bow.
Speaking of long bows I prefer to spend my pork at gentlemens clubs, it’s the trickle down effect in full effect.
Probably could have referenced stimulus in my last, massive opportunity wasted.
So that explains your views of mothers who dare to breast-feed in public. ‘Classy and discreet’ in your dictionary means getting $100 lap dances in dim-lit dens of depravity.
There’s more alliteration for H&H – ‘Dens and Depravity’. Has a nice ring to it.
I didn’t think high-profile media personalities were supposed to visit “gentlemens clubs”.
I’m not sure about the pokies but Gerry Harvey got very excited by the KRudd free money in 2008 – big telly sales went through the roof apparently. Same thing with the schoolkids bonus and the single mum’s cash payment (so I’m told).
Harvey should be relatively happy these days as well after the hot summer most of us are having so far. More aircons for everyone as he was wishing for late last year! To bad if everyone already had enough aircons from the previous splurges!
When it comes to a choice between the following “stimulation” options:
1. Driving debt using interest rates
2. Governments doing stuff badly
3. Putting money in the paws of the public
No. 3 would seem to be the clear winner.
If the money is actually spent on fripperies and gambling that sends a pretty clear message that there really is a genuine lack of demand in the economy for stuff that is really needed and the governments and the RBA should think twice before trying to stimulate demand themselves.
Sometimes, especially after a credit boom, a lack of demand is there for a reason, people lose the desire for a whole lot of crap they were putting on credit.
Of course there may be some worthwhile public infrastructure projects that require government co-ordination and possible legislation to get going but how many govt stimulus projects in recent times fit that criteria.
How many of those ‘govt projects’ could easily have been left to ‘households’ to decide if they were warranted by voting with their wallets.
For example:
Did the govt need to do anything more in relation to pink batts other than explain the benefits to heating bills etc and suggest that households consider using their ‘stimulus’ check for that purpose?
A demand is always a cause for a concern but we should think twice before rushing into fill it.
Sometimes it is there for a good reason and it will take time to rebuild – especially after a credit boom ends.
A demand ‘hole’ is always a cause for a concern but we should think twice before rushing into fill it.
The process of economic adjustment – when fancy taps, stainless steel appliance and other credit boom shops/industries wind down close and new businesses/industries open takes time.
“So, it seems that the nature of the cheque may also play a role. A clearly delineated stimulus cheque is spent in the way it is intended. A different kind of cheque may be valued differently. I have long suspected that despite the whinging Australians are the most conformist people on earth.”
Completely agree H&H.
And if that’s the case, it suggests that targetted fiscal policy could be quite effective in Australia.
I have long suspected that despite the whinging Australians are the most conformist people on earth
Funnily enough a lot of immigrants would agree with you. The “larrikin” is a myth. It’s noticeable, for example, that very few speed cameras have been subjected to the widely admired “thermite” treatment.
In fact, love ‘em or hate ‘em, the French are by far and away the best at letting the government know that they don’t agree with a particular piece of legislation, a nice example being the several hundred diesel-soaked sheep’s carcases deposited in the agriculture minister’s front garden a few years ago following a disagreement over EEC policy. Now THAT keeps the bastards honest…
Honest? That’s a laff. Those fat Govt fed French farmers are simply ensuring that their teat keeps on giving- at the expense of everyone else mind you.
Absolutely GSM
However, it’s the thought that counts – as Thomas Jefferson put it “When the people fear the government there is tyranny, when the government fears the people there is liberty.”. A bit of fear would shut the Nanny up for a while. The latest missive in the Australian has the nanny getting hot under the collar about children blowing out candles on their birthday. With half the world living in poverty, this is what we pay these people for….
Perfectly discussed in this BBC article:
http://www.bbc.co.uk/news/magazine-21030666
“Its claim to be a laid back country, meanwhile, is belied by the bewildering array of rules and regulations, from strict border protections to the bylaws which stipulate that cars should be parked in the same direction as the flow of traffic.
In the face of this authoritarianism, the supposedly anti-authoritarian Australians are unexpectedly meek and acquiescent. Consider compulsory voting. Recently, when the Queensland government mooted the idea of ending this almost century old tradition, there was something of an outcry. Mandatory voting has widespread support.”
I’ve always been pro-mandatory voting. I see the detriment of having to vote as being hugely outweighed by the benefit of the election not being dominated by the more extreme (and more likely to vote) members of society.
I am somewhat inclined to agree, although I would say based on my experiences that all of the conformism leaves the Aussie when he travels overseas.
lol!!
The report notes that the sheer size of the stimulus cheques combined with the message ‘spend’ encouraged just that. The carbon tax cheques, clearly targeted as cost compensation and significantly smaller, resulted in only a very modest pokie splurge.
The splurge effect a combination of the two, the message and the amount.
Lamely I used it to pay our rent and saved the normal rent money … it is still earning interest but alas not as much as a year ago!
TM.
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