Original source: The Guardian (Australia)

To the millions of families and individuals who will be receiving a share of the federal government's $42 billion stimulus package – if it passes through the Senate – the money could not come soon enough. The 'Nation Building and Jobs Plan', as it is called, provides for $3.8 billion in family payments and $6.9 billion in tax payments next month in lump sums of $950. But the measures are short-term in perspective and fail to address the causes of the crisis.

One of the aims of these payments is to give an immediate stimulus to the economy – in the hope that people will go out and spend the money. The Reserve Bank of Australia last week further reduced the official interest rate by another percentage point to 3.25 percent which should ease interest payments on some home loans with variable rates. This could also put more money into people's pockets, if it is not used to roll back debts.

'There's no guarantee of success but we will throw everything at this,' Prime Minister Kevin Rudd said. 'The world is now caught in the worst economic crisis since the Second World War, a crisis that has delivered recessions in the United States, the United Kingdom, Japan and the Eurozone,' Rudd said. At the same time Rudd is still playing down the prospects of recession in Australia.

Individuals earning less than $80,000 will pocket one-off cash payments of $950, between $80,000 and $90,000 it will be $650, and then $300 on remaining incomes up to $100,000. Low and middle income families will be paid $950 for each child at school. Post-secondary students will also receive $950. The unemployed will have to take up studies to be eligible for any payment.

In addition to the one-off immediate payments the package contains longer term measures that the government hopes will support up to 90,000 jobs over the next 18 months.

The sum of $14.7 billion has been allocated for schools over two and a half years for building upgrades and maintenance, science laboratories and language learning centers. Another $6.6 billion will be spent on the building of new public housing and defense homes, and fixing vacant public housing. There are smaller amounts for community infrastructure and road programs, and tax breaks for small business to encourage new investments.

There is $2.7 billion to cover free ceiling insulation in homes, which the government estimates will reduce greenhouse gas emissions by around 49.4 million tons by 2020.

In the $10.4 billion package in December last year, the government has recognized the urgent need for the purchasing power of people to be sustained. The further consumer demand falls, the larger the number of businesses that reduce their workforce or fold altogether. Every sacking means fewer dollars to spend, less demand for products and services, and so takes the economy deeper into crisis. The one-off payments are aimed at arresting the decline in purchasing power and demand for goods and services.

The economic crisis is in its early days. It could be as many as five, ten or more years before there is any sign of recovery. There is a limit to how many short-term 'spend, spend, spend' handouts any government can give to pump prime the economy. The one-off payments are very short-term, which will not provide the ongoing boost to the purchasing power of the community that is needed. The spending on housing, schools, community projects, etc, have a relative short-term life and their budget is limited to three years.

What if these measures fail to halt Australia's slide into recession? As Rudd himself said, there is no guarantee of success.

The question needs to be asked, could the government have addressed the issues of stimulating demand and job creation on a more sustainable footing and with better and more permanent social gains? To answer this it is necessary to examine the causes of the economic crisis, which was precipitated by the global financial crisis.

Long-term perspective required

At the heart of the economic crisis, is the huge gap between the products and services that are on the market and the means of people to purchase them. The government has recognized this but is only attempting to patch it up in the short-term and then it is back to business as usual. This won't work. This might have worked for a mild cyclical crisis, but the present crisis is far deeper and more serious.

The $42 billion would have served economic recovery and the needs of people in a far more effective manner and on a fairer basis by such means as increasing age pensions, unemployment benefits, carers' allowances and other benefits by an immediate $50 to $60 a week and by providing welfare recipients with free pharmaceutical prescriptions. These are long-term measures that also meet pressing social needs.

Lump sums are very useful; they can be used to buy a fridge, fix a roof, etc which is beyond the means of a pensioner, but it should be accompanied by an ongoing increase in income. The aged, the sick, those with disabilities, their carers, the unemployed, all have a right to live with dignity on an adequate income.

There are important environmental measures that could be made that would be job generating and eventually bring in government revenue such as the government setting up public energy companies to research and invest in wind farms and solar energy projects. A large boost to public transport would create jobs and ongoing employment, as well as take tens of thousands of cars off the road. There are areas, for example, in the outer west and north-west of Sydney where people are forced to use cars.

The package relies heavily on the private sector to deliver the various projects. The private sector has been proven time and time again to be far less efficient and far more costly than the public sector. There are layers and layers of profit built in, and the public private partnerships (PPPs) which are being proposed, have a history of corruption and secret contracts with ongoing payouts to the corporate sector.

National superannuation scheme

The government has guaranteed deposits of up to $100,000 in banks, building societies and credit unions to ensure the stability of banks. It has done nothing to protect the retirement savings of workers that are still bleeding. The post-war 'baby boomer' generation is fast approaching retirement. What will be left of their 20 or more years of savings?

This is an area where the government could act to meet pressing social needs, create thousands of jobs and provide income security for retirees. As proposed in The Guardian (February 4, 2009) it is time for a national superannuation scheme. This is not a new idea; it was on the agenda of Labor governments in the 1970s and 1980s but was essentially hijacked by those wishing to place superannuation in the hands of the private sector.

'The government should as a priority establish a national superannuation scheme, one which offers those who join it a guaranteed income on retirement - a certain amount on a fortnightly basis - what is known as a defined benefit scheme. Worker and retirees should be able to roll some or all of their super savings over into the national scheme on a voluntary basis …' The Guardian article proposed.

'The national scheme would offer security of income and its funds could be used to benefit society, by providing badly needed infrastructure and services and for job creation. For example, investment in public housing would result in homes for thousands of homeless people and create jobs and stimulate the economy. Likewise the building of schools, hospital and other public infrastructure would be of benefit to people and the economy.'

Existing industry and private funds should be obliged to invest a certain percentage of their funds in public sector infrastructure and services.

Address the causes

The financial crisis was caused by the unfettered global operations of the largest financial conglomerates that were let loose by financial deregulation. Capitalist governments, including those of the US, Europe, Japan and Australia abandoned fixed interest rates. They removed controls on currency exchange rates, offshore borrowing by companies and inflows and outflows of currency. In doing so, they surrendered critical mechanisms of economic policy.

This was done in Australia by the Hawke Labor government in the mid-1980s, pursuing economic rationalist (neo-liberal) policies. The result of these policies was an explosive increase in financial speculation and diversion of investment capital from the real economy of production. A plethora of investment banks, hedge funds, and all sorts of other dodgy, unaccountable speculators appeared on the scene, along with their new investment 'products' that were often nothing more than pure gambling.

Financial deregulation was accompanied by privatization, the removal of tariffs and many of the controls on trade and foreign investment, which also undermined the government's ability and responsibility to govern in the economic sphere.

The government has not taken any measures to regulate the economy. It is still pursuing the same economic rationalist policies of privatization and deregulation, and leaving it to the markets (transnational corporations and financial conglomerates).

All of its measures so far, such as the guaranteeing of bank deposits up to $100,000, assistance to specific industries, and even the latest package have the primary aim of stabilizing the financial system, stabilizing the economy and bailing out capitalism which is in crisis. The one-off handouts serve this purpose, keeping business in business. Businesses, after all, need customers with money in their wallets.

The other direct means of increasing purchasing power is wage rises. The government is letting employers and providing arguments to be used against future wage rises. The difference is that de facto wage rises out of taxpayer revenue inevitably means cuts in social welfare or government services.

A cut of 10 percent in Australia's military budget would free up billions of dollars for job creation and welfare benefits, and not expose Australia to any military threat.

At present Australia is like a small rudderless ship being buffeted in cyclonic waters throwing a few life jackets into the sea. It is time to take hold of the rudder and steer Australia to a safer future.