Time to touch the brakes?

Australia is already heading for respectable economic growth this year  -  and stronger growth next year.

So why is the Federal government persisting with its economic stimulus, instead of scrapping it?

Especially as the Reserve Bank is – very conspicuously – returning the nation to more normal interest rate levels.

Isn’t there a contradiction here, with two arms of economic policy pointing in different directions?

That thought is certainly understandable, at present.

But the Treasurer, Wayne Swan, says there are things we musn’t forget.

He notes, for example, that the OECD is warning that it would be risky to remove stimulus measures too soon.

Swan says, too, that Australia must heed its own experience.

“The lesson of previous recessions is clear,” he says.

“Unemployment takes a lot longer to go down than to go up.

“And nothing is more debilitating to a country and to an economy than prolonged high unemployment.”

The OECD now expects Australia’s unemployment to peak at 6.3 per cent, well below the level of 10 per cent, plus, that the United States has already chalked up.

Swan points out, too, that two of the three  phases of the government’s stimulus packages have now largely passed.

The third – and final – stage is now largely about infrastructure projects, involving badly needed  new road, rail and port facilities, as well as the government’s “education revolution” and its high speed broadband project.

Even so, big sums of money are still involved.  And there is still plenty of room for miscalculation, either way.

Related stories:

1. Australia’s growth to slow
2. Why the US still matters to Australia
3. Australia’s unemployment rate “to rise:” PM