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Progressive impact due to australias economic stimulus plan

Introduction:

The Australian federal invested 10 billon dollars to improve the economic situation due to global economic crisis by introducing the ‘Economic Stimulus Plan’. Though this plan is to reduce the impact of global recession, government targets pensioners, families with kid(s) and carers to whom these bonuses are to be given out as an economic security strategy. And the government suggested the people to spend these bonuses for this Christmas so it will help the economy to rise rapidly. In addition, Mr Rudd said the Economic Security Strategy would strengthen the Australian economy “in the face of the worst global financial crisis since the Great Depression.”

The government choose this option as the best, despite of numerous alternatives to achieve the same goal, thus in the following report positive and negative opinions are to be discussed and suggest some more alternatives other than job opportunities, business growth or families.

Progressive Impact due to this plan:

Benefits for the pensioners:

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This economic stimulant package is purely meant for the pensioners and the aged citizens, where they can utilize these bonus packages for renovating or repairing their property, food, medication, clothing and the excess can be kept as savings or for celebrating this Christmas. Single pensioners will receive a lump sum payment of $1,400 while pensioner couples will receive $2,100. Also, the help will be given to self- funded retirees, the holder of a Commonwealth senior health card whose income collapsed by the financial crisis.

Benefits for the carers:

These funds may reduce the burden of the carers with the lower income group in helping the physically or mentally challenged member in their family, and there by enable the entire family to participate in Christmas celebration. People receiving the carers allowance will also receive $1,000 for each eligible person in their care.

Benefits for the eligible families:

As the government is ready to sponsor exactly 1000$ for every child in a family, where these bonus package can be spend on kids fee or buying a Christmas gift to make the kids happier and the excess amount can be kept as a reserve for the further requirements.

Why government is not interested in other alternatives such as,

Raising job opportunities:

Although unemployment is the major problem due to global financial crisis, the government is least bothered about this particular alternative as this season is meant for holidays, where there would not be much of economical activity and moreover job openings at this particular season may not benefit the Australians, as most people prefer going on a holiday trip.

Business growth:

The government knew the fact that none of the business growth can be enabled unless; the purchasing power is enhanced among the customer as a result 35 percent lost their jobs due to global economic recession, and obviously their saving. Thus the idea of not investing funds on business growth is a wise decision on reducing the impact of global financial recession in Australian economy.

With the inflation, interest rates were rising and in the view of many, Australia would escape the economic slowdown in the developing world. But it doesn’t happen so. Instead the federal Government took the extraordinary step of guaranteeing deposits held in all Australian banks, building societies and credit unions and the Reserve Bank of Australia has delivered an unexpected 1% cut in interest rates, citing heightened instability in financial markets and deteriorating prospects for global growth. This was an extraordinary turnaround. It is, of course, the result of Australia becoming ensnared in the global financial crisis that began in mid-2007 and has intensified ever since.

Negative impact of the plan:

The negativity of the plan can be measured directly as the Prime Minister Mr. Kevin Rudd is well aware of the criticize with regard to the plan, as people may not utilize these funds efficiently as they are more tend to spend these bonuses on drinking alcoholic substance and gambling. Subjected to the matter of fact these are not just the criticism instead they are the actual happening as the period in which was given out was a festival and holiday season. And other major reason for which it is expected to have non productive impact is because all through these days due to global financial recession people must have lost their recreational part thus as the result when they receive this huge amount particularly during the Christmas, causes more prone to spend inefficiently.

Indirect negative Impact:

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The package offered by the government will not be helping in easing the economic pressure as these stimulus packages are given to the pensioners and families with children where a portion would have been spend on fulfilling their needs and rest of the amount is to be spend on drinking and gambling.

Instead if the government wishes to help the pensioners, it could have given the bonus amount segmenting it into three or more instalments and fees reduction for the children or a government authorised gift voucher for the particular amount where it cannot be exchanged against unwisely spending products or services and valid within Christmas. And the vendors can submit the collected gift voucher and collect their cash back with tax exemption. There by the government could have utilized this plan efficiently.

Other negative Impact:

Due to this plan the funds for reducing the global financial recession through other alternative may get affected as in case if the required result was not driven out through this plan, then it may take bit longer period for the government to introduce some other stimulating package to enhance the economic condition in Australia. And during that longer period of break the economic conditions are more likely to get worst.

To overcome the recession, the government should initiate some strategy to ensure money flows through easily, instead due to this plan about half the amount is to be spending on gambling and alcoholism where these sectors already start to accumulate the resources even after the crisis. And the financial recession contributes much on accumulation of resource in these regions as people go on a alcoholism to suppress the depression caused due to economic fall back and to meet the debts due to unemployment they are forced to take risk of betting the remaining money all they have got as a remaining. And when they keep betting, the more they play the more changes of loosing the money. Due to this plan during the wrong time of the year, the sector which was growing now tends to get bigger and worst, causing the life of the people to be on the tragedy zone.

Though it has many positive and normative impacts, the package was welcomed by retailers, economists, unionists, pensioner and carer groups. According to UBS Australia chief economist Scott Haslam if pensioners and families spent all of the $10 billion, it would boost Christmas sales by 30%

To reduce the pressure of the global economic crisis, the alternatives are as follows:

Sustainability

It was essential for the Government to stipulate the economy when the private sector was in retreat. Similarly, it is necessary for the government

to bring back to surplus over time after recovery of economy and then private sectors could expand. In fact, responsible and conservative economic management include both these things.So based on these ongoing regulations, we can build the economy which leads to a sustainable growth in the Australia’s future economy.

Over the years, Australia depended on the great build up in the price of a mining sector on the share market. As a replacement for, Australia needs to put up stable base for growth by the reformation of the economy to improve the long term production. Thus, the long term enhancement should yield in higher national living standards. Australia must embark upon a “building decade” – executing a plan of national building to be sure for making foundation of ongoing conservative economic development.

Time is the greatest factor and needs to be taken into consideration for the growth of Australia’s economy. It takes time to invest in building up of the future infrastructure, in developing the skills for the future, in generating the competitive tax system for the future, in the reformation of the agenda and in maintaining the national balance sheet of the moving ahead economies.

Global policy

Coordinated national and global responses are required for timely exit and sustainable recovery of these new challenges, where the major economies must effort together on the orderly and stable exit from strange fiscal and monetary policy stimulus, and which is the synchronized unwinding of the global savings and investment imbalances that developed between the superfluous countries in the East and scarcity countries in the West and the coordinated reduction and removal of the emergency market interferences put in place, for example bank guarantees and their substitute with a new, transparent, authorized system for the global financial system as well.

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The global community wishes to setup a process to organize way out from temporary stimulus through the G20 for when the time is appropriate.

For the years, many Western countries used too much, living beyond their capacity and took debts from those nations that saved too much and therefore now the world faces a major confront re maintaining the global economy.

Creation of home made products and job opportunities:

The government should impose increased duties on the products that are imported from the abroad nations and measures should be taken by the government to build many industries within Australia and produce the goods, those were previously imported. By choosing this alternative the money from the home country will not be passed out and other important benefit of this alternative is, unemployment can be eroded causing the people to spend on what they have earned and the gross income per capita can be improved.

To make this plan successful, the government should create the industrial zones and provide industries with adequate transportation, water, electricity and other fundamental necessities, as along with providing some financial aid to commence the business. This alternative does not only provides a better scope for lessen the global financial recession in Australia but indeed it also creates a strong back bone for the economical development providing both long term and temporary solution for the better economy.

australia">Improving tourism into Australia:

Tourism plays an important role to boost the country’s economy. Thus, the government must work on improving the tourism into Australia, where it helps to gain exchange from abroad nations, causing opportunities for variety of jobs especially for the industries which relay upon tourism such as Airlines, hospitality industries etc. To enable this alternative, the government must allocate funds in creating many tourist spots and displaying the advertisement work in other nation from where the tourists are attracted.

Tax reduction to enable price cuts:

As according to economics theory “Sales creates demand” thus to improve the economic condition demand must be stimulated, and to stimulate demand, sale of the product must be affordable or reduced from normal availability of price. This price reduction does not only implied upon the pricing strategy adopted by the vendor or an organisation, instead it also depend upon the taxation policy adopted by the government, thus the taxes imposed on consumable goods should be reduced to a certain percentage and the existing sale would be improved as the initial cost of the product remains same with the only peculiar thing is, government charged tax would be reduced enabling price cuts or reduction.

Although through this alternative the government can loos its revenue initially, than what it normally used to be but this alternative is suggested for the limited time until, the pressures of the existing global financial recession gets under control, through this process the economic activity can improve immediately and it reaches everyone in the community, instead of triggering particular segmented group of people.

Economic crisis on its phase to recovery has to overcome many difficulties. As growth returns, many Australian families will deteriorate due to difficulty in overcoming the changes from crisis to prosperity.

For some period, during the transition period of change from the worst to the best, Australians will continue to feel financial burdens and economic pains in some areas such as business houses. Demand for employment increases as there is positive change in economy which causes a lag in economic indicator.

One of the most prominent changes in domestic as well as worldwide economic policy setting Australians have gone through is none other than the shift from crisis to recovery. Though the return to growth is a sign of positive change, it will also involve challenging adjustment.

In recent economic crisis on an average, unemployment has increased 13 months after growth turns positive. Thus the budget assumes the unemployment rate to reach 8.5 per cent by June 2011. That means unemployment will continue rising even after the return of growth. Therefore, to remove the problem of unemployment the business will still take time to hire the sufficient number of workers confidently.

Rising growth will inevitably cause interest rates to rise over the next 18 months. In the past 18 months interest rates have fallen very low. As a result of the cuts in official rates of 4.25 per cent points over the past nine months, the average family with $300,000 as mortgage has an extra $6,000 in their bank account. As the recovery continues, rates will rise, putting additional financial pressure on many families, as per the economists.

Thirdly, as the demand for commodities increase as the worldwide economic condition improves towards stability and so does the prices hike up simultaneously. This will be both beneficial and harmful for Australia. Improve in global economy provides boost to the exporters but also will be a big burden and generates economic crisis to many Australian working families due to increase in food and petrol prices.

Fourthly, Government’s plan to return the budget to surplus will involve some harmful decision for many Australians. The Government played an important role to boost the economy through expansion of the budget as the private sector was not active last year. But, in the recovery phase, the private sector will act responsibly as the Government appropriately gives up.

Just as the Australian families begin to feel the first benefits of recovery, they will be confronted by these four pressures. But, the Government is confident and optimistic that Australia will come up with a stronger, stable and more prosperous economy even though there are many hurdles and the recovery phase very long and tough.



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