We've recently been "blessed" with two pieces of good (bad) news... Not only has the RBA slashed rates again in an attempt "...to give further support to demand [and] help to cushion the Australian economy from the contractionary forces coming from abroad," but Kev and Wayne have yet another "stimulus" for us!

Much like the first one back in December, in which we were informed by Kevin Rudd that,

"By spending their payments, families and pensioners will help create Australian jobs and strengthen the Australian economy"

With the latest stimulus, Rudd is spouting things such as,

"It does not represent the removal of the problem - it is our best effort to reduce the problem [and] it is a strategy in which a nation can have confidence and as I have said before, it is a strategy to which we will add in the future as is necessary."

So how about we briefly address the plan then and see how much truth there is in what Kevin says (assuming the Liberals don't block it). We're told the plan consists of:

• $14.7b for school infrastructure and maintenance;
• $6.6b for community and Defence housing;
• $2.7b small business tax break;
• $890 million for community infrastructure and road improvements;
• $8.2b tax bonus for those earning under $100,000;
• $1.4 billion for single income families;
• $20.4 million for farmers in hardship;
• $2.6 billion for children going back to school;
• $511 million for students and unemployed returning to training;
• Free ceiling insulation for around 2.7 million homes;
• An increase to the solar hot water rebate of $600 and a doubling of the Low Emissions Plan for Renters to $1,000.

Infrastructure Spending (this includes #1, #2, #4...and I may as well include the last two as well):

These "social investments" really tug on the heart strings -- who is going to object to additional funding for schools or housing for poor/military/disabled people?! This makes it difficult for people to see the real picture, the economics behind it all, which in this case -- just as it is when the government spends on anything -- is a bunch of hogwash. As Murray Rothbard wrote:

"By stressing particular, specific problems, the inference comes that the taxpayer must quickly provide each of a number of goodies: food, housing, clothing, counseling, et al. in turn. And this means far greater subsidies to different sets of bureaucrats and special economic interests: e.g. construction companies, building trade unions, farmers, food distributors, clothing firms, etc. Food stamps, housing vouchers, public housing follow with seemingly crystal-clear logic."

Once again, we see that this is nothing more than a diversion of labour and capital from more productive areas of the economy, incentivising investment in unproductive areas. Not only that, but by providing 'welfare' for these people -- as Rothbard calls them, the "parasite class", we are giving them yet another reason to not work (as if they needed any more).

Regarding school spending -- why not privitise the whole system? Do you honestly believe that the state can do a better job? They've done a bang-up job so far haven't they? That's an issue for another time though (if you're interested in how it could work, here's some reading for you - Rothbard, Block, Rockwell).

Free ceiling insulation? Come on -- what's the bet that we'll be reading about that industry in a years time with their lobby group begging for a bailout and welfare payments for their former workers. It's not all their fault -- the government is creating "fake" demand and encouraging entrepreneurs to seek out this profit. Unfortunately it's not sustainable and all of these businesses will face the harsh reality when the party stops. This will not "create" any jobs. The solar panel rebate falls into this category as well.

"Bonuses" - this includes all of the one-off payments, or everything not covered above:

Tax cuts are great, but only when they're accompanied with a decrease in spending as well. If they don't come with the latter, then we're just going to have to pay for them in the future either through taxation or inflation (same thing). Unfortunately for Rudd, all of his "stimulus" is just a once-off payment (in effect, a transfer of debt from private households to the government -- in other words, robbing the savers to pay the debtors). I'm not sure about the details of the small-business tax break; if this is indeed a perminant reduction in tax, then it's the only piece of good news to come out of this package (but again -- spending must be cut as well!).

The Farmers, or Farmed Robbery:

$20.4 million for our "struggling" millionaire farmers, typical. These guys are always receiving special treatment, because of how "essential" they are to our economy. This is yet another "temporary" subsidy to our farmers, designed to "ease the pain" that they seem to constantly be in. At the end of the day, price supports, supply restrictions, protectionism, taxes and government regulation all cause prices to be higher than they would in a free market.

So, will this "stimulus" help us?

Plain and simply, no. This package will only prolong the recovery period by further distorting the market. Only when the government ceases involvement and, literally, does nothing, will we be able to have a proper recovery. Kevin Rudd is flat-out lying (even if he believes it himself) and this is nothing more than catering to traditional labour lobby groups and campaign financiers at the expense of the rest of the economy.