Wednesday, October 29, 2008

More on the distributional effects of the Australian economic stimulus package

One of the points that I made in my post The Australian economic stimulus package - distributional and timing issues was that we should not assume that the whole spend would automatically flow across into increased consumption.

A survey by the National Retailers Association suggests that the effects of the package is likely to vary greatly across groups, with a significant proportion planning to use the money to pay down debts or increase savings.

This should not come as a surprise, nor does it of itself invalidate the package. We just need to be realistic about likely effects.

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