On the weekend, I did some sums. I added up all of the Federal Government’s current and promised commitments to keep the economy going and to relieve the suffering of the un and under employed during the current crisis, and then divided it by the population of Australia.
It comes to about $7500 which is going to be spent on average for every person, adult or child, in this country.
That is a lot of money, and we are in the situation where much more is going to be needed after the crisis passes, as right now, businesses are shutting and the only stable employment is in the medical profession or a supermarket. People are not going to be out there spending their cash in restaurants, or bars, or clothing boutiques, or dog grooming businesses.
They are going to be stocking up on tins, toilet paper, hand sanitisers, and other bunkering down type commodities. The velocity of money is going to really slow down. To speed up it again, after this blasted pandemic has lifted, will require more government spending, probably in the form of a large cash gift to every person to go out there and splash cash around, just like Rudd and Swan did during the GFC.
In the meantime, who is going to pay for all this? We are, eventually. Money spent on trying to keep the country going in this way is going to require either larger debt, which will lead to inflation, or larger taxes, or cuts to government services. This time, it might be worth it. Last time, when Rudd proudly claimed to be a Keynesian, creating lots of jobs for Irish backpackers to install insulation bats and solar panels and to build unnecessary second school halls on school ovals, it was not worth it.