The Schoolkids Bonus Is Stimulus, But You Can’t Call It That

8:47 May 10th, 2012 | 0 notes

‘Australia is a patchwork economy.’

It is a much abused phrase, but an accurate one nonetheless. You know the deal: the mining sector is driving the Australian dollar higher, making the rest of our export base less competitive with the rest of the world. What this doesn’t explain is the state of our retail sector. With imports being cheaper, you’d think that Australians would be flooding into their local shops. They are not.

Australians are having paradoxical thoughts. Low consumer sentiment appears to be linked with shoppers conflating the state of the global economy with the state of the Australian economy. This simply is not the case. 

We know mean gross incomes in Australia rose by 50% in the last half of the 2000s, and we also know that household spending only increased 38% over the same period. So the economy is chugging along nicely, but people don’t feel like it is. More importantly, they’re scared about what is happening in the rest of the world. As a result, Australians aren’t spending the money we know they have. 

This goes a long way to explains the lousy performance of the retail sector. Retail trade rose by a meager 0.9% in March, the latest month for which statistics are available. This follows on from the low retail growth we’ve seen for the past year now.

Framing the Schoolkids Bonus

When viewing the Schoolkids Bonus from this angle, it seems very obvious to me that this handout is akin to a second round of stimulus. The Government clearly wishes for people to spend it just as they did the $900 handouts during the financial crisis, albeit with less urgency this time around. If past experience is anything to go buy, much of the $820 bonuses will be spent quite quickly. The OECD found that forty percent of the $900 cheques were spent within three months. Assuming a similar pattern, the Schoolkids Bonus will get $840 million into the economy by September.

Here is where messaging matters a great deal. Openly calling the Bonus a stimulus package is bound to have the opposite of the desired effect. When consumers are already being overly-thrifty with their cash, reaffirming their unfounded fears about the economy by telling them the economy needs stimulus will only drive sentiment (and spending) even lower.

The aim is clear: the Government wants to provide extra support to sectors of the economy not benefitting from the commodities boom. Given the success of the previous fiscal transfer package, another round looks like a good way to achieve this aim. It also appears to be a measure that has very little downside political risk for the Gillard Government, unlike everything else it does.

Compared to the rest of the Western world, our economy is going gangbusters—most of it. It is no surprise that the Government would want to help along parts of the economy not doing so well. 

The Schoolkids Bonus is most certainly targeted stimulus at these parts of the economy, especially retail. 

Just don’t tell anyone that.

11:37 Apr 20th, 2012 | 2 notes

A closer look at US Federal Government mandatory spending from the Congressional Budget Office

A closer look at US Federal Government mandatory spending from the Congressional Budget Office

The ‘Minister for Whatever You Can Think Of’

10:23 Oct 10th, 2011 | 81 notes

We have a problem with giving cabinet portfolios decent names in Australia. We have silly names like the ‘Minister for Families, Housing, Community Services and Indigenous Affairs’ and the ‘Minister for Broadband, Communications and the Digital Economy’, as if the purpose is to make sure that everyone in the country knows that the federal government does everything including managing the kitchen sink—which is possibly part of the Sustainability, Environment, Water, Population and Communities portfolio.

Then we seem to have a problem with changing said silly portfolio names. The Australian Customs and Border Protection Service has been overseen by fourteen differently named portfolios over the past fifty years:

  • Minister for Customs and Excise - 1956-1975
  • Minister for Police and Customs - 1975-1977
  • Minister for Business and Consumer Affairs - 1977-1982
  • Minister for Industry and Commerce - 1982-1984
  • Minister for Industry, Technology and Commerce - 1984-1988
  • Minister for Science, Customs and Small Business - 1988-1990
  • Minister for Small Business and Customs - 1990
  • Minister for Small Business, Construction and Customs - 1990-1993
  • Minister for Industry, Technology and Regional Development - 1993-1994
  • Minister for Small Business, Customs and Construction - 1994-1996
  • Minister for Small Business and Consumer Affairs - 1996-1997
  • Minister for Customs and Consumer Affairs - 1997-1998
  • Minister for Justice and Customs - 1998-2007
  • Minister for Home Affairs - 2007-Present

Notice how we’ve had a Minister for Small Business, Construction and Customs, AND a Minister for Small Business, Customs and Construction at different times.

Department names also have horrendous nomenclature. We do not tend to name departments after ministerial portfolios, which is terrific when trying to work out what everyone does. For example, Medicare is not administered by the Department of Health and Ageing, but by the Department for Human Services. Because who would ever think that our public health system was run by the Department of Health and Ageing? 

Another example is that there is no Department of Home Affairs to go along with the Minister for Home Affairs. Rather, the Minister for Home Affairs oversees the Australia Customs and Border Protection Service, the Australian Federal Police and the Australian Security Intelligence Organisation, which are all actually part of the Attorney-General’s Department. 

If you were looking for the Department of Education, Employment and Workplace Relations, over the past few years you would have instead been looking for either the Department of Education, Science and Training, the Department of Education, Training and Youth Affairs, the Department of Education and Training, or the Department of Workplace Relations. But be sure you don’t confuse who has responsibility over the Department of Education, Employment and Workplace Relations. You could be looking for either the Minister for Tertiary Education, Skills, Jobs and Workplace Relations, or the Minister for Schools, Early Childhood and Youth. Take your pick.

There is nothing structurally wrong with our ministerial cabinet system. My point is that it is confusing, very confusing. The United States Department of State has been in continuous existence since 1789 with exactly the same name! The person responsible for the Department of State is the Secretary of State! If an agency doesn’t look like it immediately fits into an existing department, don’t just create another department. Heck, put it in the department that sounds right. The United States Office of Scientific and Technical Information? Well, it sounds scientific. The Department of Energy sounds sort-of scientific, so just throw it in there.

Reorganizing department names and ministerial portfolios for the long term would not only ease confusion, but would save substantial resources from having to reprint letterheads every couple of years. I’m sure the Minister for Sustainability, Environment, Water, Population and Communities/Minister for Environment Protection, Heritage and the Arts/Minister for Environment, Heritage and the Arts/Minister for the Environment and Water Resources/Minister for the Environment and Heritage would be most pleased about such a development, depending on which year you asked.