Friday, January 28, 2011

Economics of the Queensland Flood

Seen here:
The Government will also save A$1 billion by deferring work on road projects in Queensland and other states, releasing skilled labour for rebuilding.
This is something normally only seen on libertarian and Austrian blogs, so i was quite surprised and pleased to see it coming from Julia Gillard.

It is a recognition that government spending crowds out and has a negative effect on other activity(though arguably not always a net negative effect). Because of this, a billion dollars of government spending is being deferred, specifically work in areas which use a lot of the same resources - in order to crowd out the rebuilding less.

There's seemingly only one step left before they think about government spending crowding out the private sector, and the implications that "stimulus" government spending does more harm than good, and that government projects in general - including broadband network spending -come at a higher cost to the country than is currently accepted, and that in many cases these projects are simply not worth it.

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