Posted: Tuesday, 27 January 2009

Impact on Jobs and the Economy

What We Wanted

The most important priority for the Budget was to stop the unemployment rate from rising to at least 8% this year and to double digit levels next year.

"Fiscal stimulus" is not the same thing as running a deficit. The federal government is going into deficit mainly because tax revenues are slumping along with the economy, but this does not inject new purchasing power into the economy.

We said stimulus should be concentrated in two key areas:

• Public investment in infrastructure, "green industries" and public services.
• Income support for the victims of the recession, especially through major improvements to Employment Insurance and better public pensions.
• Public investment has a much bigger impact on job creation and the economy than broad brush corporate tax cuts, and income supports targeted to those most in need are much more effective than across-the-board personal income tax cuts.

Corporate tax cuts are a poor way to create jobs and help troubled industries because they are of no use to companies losing money, and have little or no impact on real investment (which was very slow in recent years outside the energy sector despite deep cuts to corporate tax cuts). Businesses will invest only when they see the economy recovering, or if new investment is directly supported by governments.
 

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