Tuesday, October 14, 2008

How big is Rudd's stimulus prackage?

Remember the “ohhs” and “aahs” when John Howard announced his $10 billion plan to; save the Murray Darling on Australia Day last year. The plan was rightly described as massive. But that money was to be drip fed into the economy over a decade. Most of this will be spent at once.

On December 8 every single pensioner and seniors health card holder will get a one-off $1,400; every pensioner couple $2,100; every carer an extra $1,000 for each person in their care; and every one receiving Family Tax Benefit Part A an extra $1,000 for every child in their care.

Timed to arrive just before Christmas there’s every chance it will be spent. The ANZ says it boost spending in the December quarter by as much as $8.8 billion, boosting GDP growth in that quarter by an extraordinary 1.0%.

The $1.5 billion to be thrown at first homebuyers will help as well. Any of them buying a newly-built home in the next month will be handed $21,000.

The measures may moderate the size of future interest rate cuts. But that will only be to the extent that they work in kick-starting spending.

There’s every sign they will.