FACTCHECK: Did Kevin Save Us From The GFC?

There are many lies being spread this election season, but none more galling than the claim by Prime Minister Rudd that he "saved" us from the Global Financial Crisis.

Sadly, it seems many Australians still believe that Kevin throwing $80 billion dollars away, and spending us deep into debt, was a good thing. To combat this, we have prepared a short fact sheet detailing the myths and facts about the so-called stimulus.

Every point is researched meticulously, supported by hard data, and has been fact checked by a number of professional economists. I would encourage you to forward this to all your contacts, as we must get the truth out.

Here are the myths and here are the facts:

MYTH: Australia only escaped the “Global Financial Crisis” because of Kevin Rudd

FACT: Australia’s escaped relatively unscathed from the so-called “Global Financial Crisis” due to the legacy of the Howard Government leaving strong budget surpluses and eliminating the debt - Australia had no net debt federally, and, according to the IMF, some of the lowest gross debt in the world. Furthermore, the Howard government's reforms to industrial relations ensured a flexible labour market and increase productivity. This – combined with some prudent monetary policy (the lowering of relatively-high interest rates by the Reserve Bank giving Australians a higher disposable income, thereby boosting consumption)  and the strength of Australian banks – is what spared us.

MYTH: Government Spending can stimulate an economy

FACT: Academic research overwhelmingly finds that the exact opposite is true: government spending makes a poor economy worse. There has been no case in history where a country has spent itself out of a recession. Here’s a great 3 minute video summarising why.  Dr Julie Novak found that  in Australia, “an increase in government size by ten percentage points is associated with a lower annual GDP per capita growth rate of between 1.2 and 2.5 percentage points”.  Empirical evidence proves that the only way to boost an economy is through tax cuts – instead, Kevin Rudd did the exact opposite

MYTH: Countries who cut spending did worse between 2008-2013 than those who increased spending

FACT: In every country where governments cut spending, the economy started to boom. Estonia is a good example of this,  and even  , Sweden – the darling country of the left! - slashed spending which resulted in an “economic miracle”. Other examples are numerous.

The facts speak for themselves:

MYTH: The Stimulus helped save and create jobs

FACT: Labor’s cooked the books! There are now 350,000 people receiving unemployment benefits who are classified as “non-jobseekers”, meaning they are not required to work and don’t come up in the unemployment figures. In fact, a conservative estimate by the Australian Bureau of Statistics shows that the number of people without jobs went up by 222,000 between December 2007 and July 2013! Treasury didn’t even bother to do proper modeling, but a peer review paper by John Humphreys, our Deputy Director, has shown that even using the Treasury’s own approach, the stimulus directly cost 30,000 jobs. To make matters worse, productivity also has plummeted under the Labor Government due to their winding back our industrial relations system back to the 1960's.

MYTH: The Stimulus Boosted Consumption

FACT: Detailed academic analysis has shown that Kevin Rudd’s “Stimulus: had – NO effect household non-durable consumption. None.  In fact, even the Australian Treasury found that Kevin Rudd’s $900 cheques  equaled only $1 of economic activity – that’s right, $1.

MYTH: The alternatives [to the stimulus packages] were to do nothing or, worse, effectively replicate the Premiers' Plan of 1931 when governments cut expenditure, thereby compounding the problems created by a private sector already in retreat. The result, of course, was an economic rout, appalling unemployment and a decade of negligible growth through the 1930s”Kevin Rudd, 2009

FACT: Despite what our left-wing high school syllabuses may say, it is a matter of historical fact that the Premier’s Plan was a success – and saved Australia. I know this is difficult for many people to accept - so steeped is the left wing myth in our culture - but the facts speak for themselves. In the United States, where President Hoover and then FDR increased spending, and the economy went into a tailspin, after the premier’s plan, the Australian economy sharply recovered: GDP went up, and unemployment started to rapidly fall. No wonder that in the United States Henry Morgenthau  – FDR’s very own Treasury admitted “we have tried spending money. We are spending more than we have ever spent before and it does not work. . . . I say, after eight years of this administration, we have just as much unemployment as when we started . . . and an enormous debt to boot.” Even the icon of the left, Lord Maynard Keynes, admitted that “the Premiers’ Plan saved the economic structure of Australia”

MYTH: The stimulus packages – which totaled a staggering $79.1 billion – were well spent.

FACT: Can anyone really claim that ‘home insulation’ can restart an economy? Or that tearing down one school hall to build another boosts productivity? Examples of waste are endless: An outback school with one student is among nine tiny schools handed $2.25 million in federal grants to build new halls, libraries and classrooms, even though they face closure. Mulgildie State School west of Bundaberg received $250,000 to build a basic 60sq m shed, after receiving a $29,000 quote from a local shed builder for a similar structure. An undercover playground with concrete floors and no doors costs $1.8 million under the Rudd Government’s schools stimulus funding,

MYTH: Labor is a “low taxing” government

FACT: Labor has increased taxes a staggering forty three times. That's right - forty three. Should we all be paying the price for their mistakes?

We are a non-partisan taxpayer advocacy group, and I will never dream of intending to influence your vote, but on this particular matter, the facts speak for themselves.

Kevin Rudd's policies - according to every serious expert - were destructive, damaging, and are destroying our economy. They didn't "save" our economy - instead, they took us to the bring of ruin.

This saturday, let's make sure everyone is aware of the facts.

UPDATE: As you might know, we run an intensive economic education program for students to counter the left-wing indoctrination they receive at universities. For more detail on the points outlined in this email, I would encourage you to read a recent presentation made by Professor Sinclair Davidson from RMIT that you can download HERE

UPDATE 2: I neglected to mention one other relevant Myth. Treasury claimed in a graph that was widely circulated that an OECD analysis showed Australia's stimulus worked. The problem with this is - they fudged the numbers, and specifically excluded a number of countries just to make the data fit their claim. The full dataset showed the stimulus had no statistically significant effect. They were later forced to withdraw the graph. 

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