Webdiary - Founded and Inspired by Margo Kingston

Recovery: Rudd spells it out
by Alan Thornhill

The”success” of the Rudd government’s stimulus package will be “a lesson” for others, including the US, which have taken a different path, Westpac’s chief economist, Bill Evans, says.

The Nobel Prize winning economist, Paul Krugman, agrees. He has repeatedly described President Obama’s stimulatory package as inadequate.

Comparisons may be odious. But they are unavoidable. The figures speak for themselves. Unemployment has now hit 9.5 per cent in the United States. But it still stands at just 5.7 per cent in Australia.

Mr Evans spoke as he released the latest Westpac Melbourne Institute of Consumer Sentiment. Surprisingly, for times like these, it showed that consumer sentiment surged by a record 23.3 per cent, over June and July.

Even its authors, though, warn that this burst of exuberance might not last. They say that the first flush of the Federal government’s stimulatory packages has now passed. And unemployment is likely to rise later this year. So the Australian economy could still contract.

Meanwhile, though, exuberance rules.

Mr Rudd is not reluctant, though, to teach others the lessons that the global economic crisis has taught him. He says the G20 must be given the job of coordinating measures to end the crisis. He fears that the world’s richest and most powerful nations, represented by the G8, cannot do it alone.

Mr Rudd presented that case very forcefully in Berlin. He drew close comparisons between the threats the world faces now – and those it faced back in the 1930s – at the time of the Great Depression.

His pitch was chilling.

Mr Rudd noted that global stock markets fell by just over 20 per cent in the first 12 months of the Great Depression. That event is commonly called the Great Crash of 1929.

Yet, as Mr Rudd also noted, global stock markets plunged by more than 40 per cent, in the 12 months from April 2008. “But there is one difference between now and 1929,” Rudd added in a speech he delivered in Berlin. “Decisive action by the world’s major economies, coordinated by the G20, has prevented this crisis resulting in the prolonged and deep decline in economic activity that the world experienced in the 1930s.”

“Uncoordinated national responses are no longer adequate,” he added. Mr Rudd warned, several times, that neither Australia nor the world is out of the woods yet.

The full text of the PM’s speech – A strategy for sustainable economic recovery: The role of the G20 – is on his website.