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Swan’s positive stimulus claim rocky
letter published in The Australian Financial Review, 18 December 2009

You report (“Stimulus drip keeps growth rolling”, December 17) that Treasurer Wayne Swan claimed “much of the credit for the positive GDP growth” of 0.2 per cent in the September quarter because fiscal stimulus contributed 0.4 per cent to GDP growth. He has also claimed that the “quick” stimulatory action by the government has prevented a recession.

However, the September quarter real GDP per head fell and has now fallen or not risen for 5 successive quarters: if that is not a recession it is difficult to know what would be.

Swan’s fiscal stimulus claim also raises the question of what identity is used from which to calculate the fiscal stimulus.

The 2009-10 Budget papers say that in current circumstances a temporary deficit, with temporary borrowing, is the only responsible course of action.

Hence the fiscal balance (net borrowing) was estimated to increase by about $20 billion in 2009-10 or about 1.8 per cent of GDP for each of the commonwealth government and the consolidated commonwealth and state general government sectors.

Australian Bureau of Statistics figures show that, while net borrowing for that general government sector in the September quarter was over $13 billion higher than in the same quarter of last year (up about 4.4 per cent of GDP), it was lower than in the June quarter. Unless the fall in net borrowing was autonomous (due to improved economic conditions) or seasonal, this implies no positive stimulus in the September quarter.

Perhaps the Treasurer could explain how he worked out the positive stimulus.

Des Moore
Director, Institute for Private Enterprise
South Yarra Vic

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