The Money Men by Chris Bowen (i wanna iguana read aloud .TXT) 📗

by announcing a pension increase that would take effect at the next Budget. A cash-payment equivalent to the increase between then and the Budget was an early inclusion in the package.

Cash-poor households were another target, with payments to be made to families eligible for the Family Tax Benefit Part A. The existing First Home Owner Grant was doubled as a foil to the falling property prices that were being observed in Australia, and that were already commonplace around the world.

Half the projected surplus was spent in this meeting. The reality was that the economic downturn was going to eat up any surplus in any event. Nevertheless, the figure was a substantial one. In the end, the make-up of the package was $8.7 billion in payments to families and pensioners, and a $1.5 billion boost to the First Home Owners Grant.

The Cabinet was not consulted about the package. The SPBC, which consisted of the government’s four most senior ministers (in effect, if not in order of official precedence), made the call. This crisis decision-making was a prime minister – treasurer relationship at its most effective. Rudd and Swan ran the economic agenda together, and their staffs were effectively merged for the purpose of preparing the response to the GFC. As Uren and Taylor note, ‘For Henry, Treasury was right at the centre of economic policy making, where it belonged. He believed the stimulus package’s contents were economically sound.’8

By early December, $8.7 billion was being distributed directly to Australian households. The impact of the quick action on consumer confidence was important. And yet Rudd and Swan knew that more was likely to be needed. A surplus was still being budgeted for, despite the size of the stimulus package and the writedowns in revenue that were projected due to the decline in terms of trade that accompanied the global downturn. In addition, despite the surge in retail trade associated with the cheques that arrived in household letterboxes, business confidence plummeted to a record low in the final month of 2008. As assistant treasurer, I spent a lot of time with senior Australian businesspeople around then, who were urging further action to stave off recession. In January 2009, the advisory practice Access Economics warned that ‘this is not just a recession … This is the sharpest deceleration Australia’s economy has ever seen.’9

International momentum for further stimulus was also building, with the IMF calling for all governments that had the requisite capacity to stimulate in the order of 2 per cent of GDP. Both Rudd and Swan spent the summer break ruminating not so much on whether to bring down a second stimulus package, but rather on what form it should take. Swan holidayed at Maroochydore on the coast of southern Queensland with a staffer ensconced in a unit nearby, to ensure that the treasurer had all the necessary updates at his disposal. This would become the standard summer holiday procedure for Swan and his office.

The SPBC reconvened on 19 January to receive an update from officials and plan for further action. Henry briefed the committee that the situation had worsened dramatically from that which had led the government to embark on the first stimulus. He told the committee to expect a dramatic decline in both business investment and household consumption. It was now clear that another stimulus would be required if Australia was to avoid a recession, and even then, it was possible that a recession was still inevitable. As Tanner, a fiscal conservative who took a rigorous approach to any proposals for increased government spending, would later recall:

The evidence was getting grimmer and grimmer about what was happening in the global economy and expectations for what had happened in Australia by that stage were souring … The starting point was advice from Treasury that there was a giant contraction occurring globally, and it would hit Australia seriously. It would have an immediate impact on growth and employment, so we needed to take further action. It then became a case of working through the various options.10

And so the group again began looking at the alternatives. The process was less time-constrained than that which had taken place before the first stimulus, but it was still extremely tight for such a substantial policy. Ministerial offices, as much as government departments, were asked to present ideas that would quickly stimulate investment and job creation, in keeping with the government’s policy objectives.

One potential program was a school building initiative. The ‘Education Revolution’, marked by investments in technology and a move towards a national curriculum, was a key area of policy activity for the government. It had the advantage of not being a one-size-fitsall endeavour; rather, projects could be big or small, as required. Unlike large infrastructure projects, small- and medium-sized school-based projects could be up and running fairly quickly, and it was not an exaggeration to say that every school principal in the country had a favourite project stashed in a desk drawer, ready to go if only funding was available. Another advantage was that almost every community in the country had at least one school, meaning that the stimulus to economic activity would be evenly spread throughout the nation. Just as the government’s concern about a housing-construction downturn fed the decision to include a First Home Owner Grant boost in the first stimulus package, so it was reasoned that a school building program would further buttress the construction industry. To get the necessary scope, $16.2 billion was allocated: more than the entire first stimulus package. A similar decision-making process led to a boost to social and defence housing of $6.6 billion.

Just as Rudd, Swan and the other senior ministers attempted to meet some education policy objectives through the second stimulus package, it seemed that they could also make a contribution to Labor’s climate change and environmental policies. The installation of insulation in household roofs would require low-skilled workers, exactly the type of worker most vulnerable in an economic downturn. A significant increase in the amount of insulation