Australia's stimulus package goes against treasurer's previous forecasts

The Australian treasurer has unveiled his four fiscal stimulus bills, which were rushed through the lower house in an emergency overnight sitting last week. In recent days, the government has chastised the opposition for holding an enquiry into the details of the bill in the senate, and blocking its immediate adoption as legislation.

The federal opposition, and other critics of the bill, note that the size of the borrowing that must take place in order for it to proceed would place Australia in the position of debtor for decades to come. The government has forecast the total cost to be in the order of $42 billion dollars.

The government claims that the most recent economic projections demand stimulus of this magnitude, yet only months ago, the treasurer's projections were for "slower growth, but solid growth" of 2% for the 2008-2009 financial year. Now, new economic data have shown that GDP is shrinking.

The reliance on borrowing, which will have to be repaid, is a big call, given the inaccuracy of previous predictions from the treasurer. Indeed, as the treasurer pointed out himself, "Given the new circumstances, ah, we are going to have to cut our cloth to suit those circumstances, and we're not going to be able to do, ah, the wish list that many people have for us to do. It's that simple". A $42 billion deficit spending spree is a big change of tune indeed.