Background of Case On 2009 Fiscal Stimulus

Background of Case On 2009 Fiscal Stimulus “… Governments everywhere are discussing or implementing “stimulus” packages …I doubt Australia need much fiscal stimulus, except that which improves national productivity and competitiveness …” (“We need stimulus that boosts productivity, not ‘sugar hits’” Henry Thornton, The Australian Feb 3 2009) “…Kelvin Rudd’s $42 billion National Building and Jobs Plan is likely to disappoint … Most of this $12.7 billion handout will be saved … What’s spent will have “no long-run benefits … (I)t has gone to capital works that will not have big supply-side payoffs …” (“Keynes out of drawer” Michael Stutchbury, The Weekend Australian Feb 14-15 2009) Critics have argued against the Australian government’s fiscal stimulus in 2009 claiming that it may not be effective in the short term and has no benefits in the long term.

You have been tasked by the House of Representatives Economics Committee to answer the following questions:

1) Using data drawn from the Australian Bureau of Statistics (ABS), present either Tables or Diagrams showing Australia’s economic growth from 2007 to 2015. Describe the trend and examine the cyclical movements. (25%)

2) Discuss and analyse the effectiveness of the fiscal and monetary policies employed in 2009, illustrating with aggregate demand-aggregate supply models. In your discussion, critically evaluate the above arguments put forward by Thornton (2009) and Stutchbury (2009). Discussion and analysis must be supported and referenced using peer-reviewed journal articles. (75%)