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Actions to stimulate the economy in 2009 and beyond.

Posted by Greg Atkinson on Dec 17th, 2008

It seems that almost everyday we hear about another government plan aimed to stimulate the economy. Finally it seems the government has stopped blaming the previous government for inflation (and a large budget surplus) and is now blaming the world for the slow down in the Australian economy. However as I have mentioned in other blogs much of the damage done to the Australian economy has been self inflicted, and so the best way for our nation to bounce back in 2009 and beyond is via some self help programs. Australia cannot wait for the global economy to come along and somehow save us, nor can we expect a return to business as usual.

The Roman Emperors attempted to keep the masses happy by providing spectacular games in the Colosseum and handing out free bread. World leader’s today try to host major events (Olympics, APEC meetings etc) and hand out government bonuses, tax cuts and one off payments. However although games, free bread and cash handouts might be popular, they basically do nothing to help a nation’s economy over the longer term.

So what can the Government do in the face of a global downturn you might say? Well the answer is actually quite simple…support businesses. After all businesses put money into people’s pockets (via salaries) as opposed to governments which take your money, spend it,often give it to other people and sometimes generously give some back to you. (and then want to be thanked for doing so!)

So let’s look at some measures that I believe would help the economy and businesses.

Forget the emissions trading tax..oops I meant scheme. We are the not the worlds biggest polluters by a long way and if you take into account the size of Australia versus our CO2 footprint then I cannot see what we are supposed to be doing. Let’s stop clearing trees, plant a few million more and just encourage low polluting industries. (maybe we need economists to play SimCity?)

Go nuclear. Yes my friends there is a source of energy out there that will reduce our CO2 emissions, create jobs (actually create a whole new industry) and best of all we have all the raw materials needed to generate power (i.e. uranium) sitting in our own backyard. We do not need to locate the nuclear plants near coastal cities, just spend a bit extra and locate them in remote locations near water. If needed why not create a few massive inland lakes? If you wish to solve big problems then you need to think big. I wonder what ever happened to big projects like the Snowy Mountains Scheme?

Cut the corporate tax rate. There is no doubt that companies would benefit from a tax cut so let’s do it. Who cares what the average OECD corporate tax rate is unless we want to be an average OECD country. I am not sure by how much the rate should be cut, but let’s say around 5% and make sure we encourage companies to invest serious money in R&D so we do not become the thickheads of Asia. In addition if a company meets certain “green” criteria such as reducing pollution and recycling water, then they should be entitled to an additional reduction in tax.

Invest in public transport. I read recently where Sydney was judged to have one of the worst public transport systems in the world and this is no surprise I guess to anyone who lives in Sydney. Personally I dread flying back to Sydney as I know the horror of getting around town will start from the moment I clear quarantine. (after a lengthy wait of course) One can only wonder how much the productivity of Sydney is adversely impacted by train and traffic delays and I suspect there are problems brewing in other major Australian cities as well. So let’s have a truly national urban public transport plan that would not only look at getting people moving around our cities in a more efficient manner but would also reduce our dependence on imported oil.

Simplify the tax system. You know you have a problem when you need a mountain of people to administer the tax system and also a small army of accountants to help people fill out their tax returns. It reminds me of my days working in the telecoms industry where you had people everywhere working on technical specifications, but the mobile phone industry as a whole was unable to develop the iPhone. In regards to tax we seem to have thousands of people involved but although there is often talk of making improvements, the system seems to become more complicated each year. Perhaps we need an “Apple” like entity to come in and turn the tax system on it’s head?

Become a global health care centre of excellence. As I mentioned briefly in The car industry, six billion dollars and another blunder Australia should become a world leader in medical research and we should aim to have the best hospital system in the world. Australia could export expertise in medical research and health care across the globe and this could be our first knowledge based mega industry. A curious aspect about Australia is that we aim for gold at the Olympics but seem prepared to tolerate a very average health system. (I am being generous when I use the term “average”)

Consider a space industry. Okay I am on shaky ground with this one but what the heck I will slide it onto my list anyway. My reasoning is that there seems to be a lot of things heading up into space these days and I suspect the pace will quicken during the course of this century. We already have some facilities in places like Woomera in South Australia, so perhaps we can get a little more involved in the development, manufacturing and launching of satellites?

Maybe my list of actions is a little ambitous, but wouldn’t it be good for Australia to wish for more than a return to higher commodities prices? Perhaps we could use this current global slowdown as a time to reorganise and refocus so that we come out the other side in better shape, ready to face the challenges of the next few decades.

One Comment to “Actions to stimulate the economy in 2009 and beyond.”

on 09 Jan 2009 at 1:02 pm1John

Expect some massive price moves from Leighton this year, although a recent article in the Fin from JP Morgan valued the company at $20/share, the company has a very strong balance sheet, debt to equity of less than 0.5, in fact a years profit could payout their debt. Leighton have $37billion in forward work, although they are marking down some asset values, their reliability as a contractor for infrastructure work will see them with plenty more work, as some cash strapped contractors give up contractors through lack of funding, this is where Leighton will pick up more work and then theres the Governments massive fiscal expansions which we are yet to see, also expect more as you would from Labour Governments, all looks good for Leighton, just based on current work, their Discounted cashflow value is around $30/share, include all the other potential work (even if we discount the revenues from Dubai) the stock is well undervalued.