Australia contemplating further stimulus
Updated
First to the global economic crisis, and while Australia is not technically in recession, the danger signs are already there and the government is bracing the nation for the worst.
Prime Minister Kevin Rudd may be a self-described economic conservative, but he's being urged to take some risks in responding to the looming crisis. Mr Rudd is continuing his meetings about the economy as speculation builds that a second stimulus package is not far away. Business and economists are calling for more help, but some argue the times call for some unorthodox approaches.
Presenter: Lyndal Curtis
Speakers: Nicholas Gruen ,Chief Executive of Lateral Economics; Tyrone Carlin Professor of financial regulation and reporting at Sydney University
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LYNDAL CURTIS: Whether it's talking to the public, to welfare groups, or other leaders, the Government's conversation with the nation over the state of the economy is continuing.
The Queensland Premier is the next in line; this morning talking about the economy over breakfast with the Prime Minister in Canberra - the first of a series of one-on-one meetings Mr Rudd is having with the premiers.
And the menu of ideas about what the Government can and should do next is no doubt expanding with each conversation.
Business wants tax cuts brought forward, and Peter Anderson, who heads the Australian Chamber of Commerce and Industry, says business needs help with cash flow.
PETER ANDERSON: There's also the prospect of Government enabling business to carry back tax losses that may be incurred this year back to profits that were accrued in previous years so that businesses are able to maintain as much cash flow from their business operations as possible, rather than simply delivering that into the hands of the tax man.
LYNDAL CURTIS: Others are urging the Government to look outside the square and take some risks. The CEO of economics consulting firm Lateral Economics, Nicholas Gruen, says the Government should look at special breaks for businesses that want to expand.
NICOLAS GRUEN: The argument against all of those kinds of policies is that you give away a lot of money to firms that were gonna do this in any event. But at least you're giving it to firms in an incremental way like that, your targeting is likely to be a lot better and you will - there will be more government money spent actually influencing behaviour rather than just providing windfalls to people.
LYNDAL CURTIS: Sydney University's Professor of Financial Regulation and Reporting Tyrone Carlin wants to make sure the money is getting to where it's supposed to be going. He says the Government should get involved in the business of making sure credit flows.
TYRONE CARLIN: They can channel funds through the banking sector where they participate in a syndicate basis with new loans that the banks originate. Governments could offer partial credit guarantees in relation to new loans. There are a variety of mechanisms that governments could use to make sure that credit at a reasonable price flows to the businesses that need it.
LYNDAL CURTIS: Professor Carlin is concerned that left without government help, the credit crunch has the potential to make any recession much, much worse.
TYRONE CARLIN: This is not a time to retain or simply to use orthodox solutions. This is a time to think outside the box. This is a time to be prepared to take some risks, to do some things that in other circumstances might appear radical; because the consequences, if we're not prepared to be innovative with the policy solutions, are absolutely profound.
