The Rudd Government has told Australians to ‘spend, spend, spend!’
Mr Rudd has even handed out $8.7 billion in cash incentives to get the party started – again! But like after any good party, waking up to another shot of vodka is the last thing most of us really need. While it dulls the pain for a moment we inevitably have to face the consequences of excess consumption.
Yet that is exactly what Mr Rudd is asking millions of Australians to do in the coming weeks. Consumers are drowning in a sea of debt and yet they are being told to spend the windfall headed their way courtesy of the Australian taxpayer.
I question the wisdom of the message but increasingly wonder if it will be heeded by the cash-strapped Australian consumer.
Australians have been living large on the back of rising asset prices for some time now. Rising house prices have seen home equity become a de facto ATM with lines of credit loans used to finance a huge range of lifestyle products.
The share market provided a seemingly never-ending source of wealth. First the dot com boom of the late 90s, followed by financial stocks, then resources. What a party it was. Any time the music stopped another track would kick in to get it started all over again.
But this time it looks like the music really has stopped, and consumers are afraid to get it started up again. That’s why I don’t think the Rudd Government’s near $9 billion party starter will work.
During tough economic times, people get scared. They are scared of how much money they owe. They worry about losing their jobs, their homes and their cars. They often don’t know how they are going to pay their weekly grocery bill let alone consider getting another plasma TV.
When confronted by fear, there are three likely human reactions: fight back, flee or freeze. In all three cases, when financially stressed, the most likely outcome when handed a windfall is to reduce the level of one’s debt.
This is exactly what the Government doesn’t want – yet it is the most responsible individual course of action for most of us to take.
So while Mr Rudd tries to convince us all that we can spend our way to continued prosperity, I think the debt-loaded Australian consumer might see things a little differently.
Cory Bernardi is the author of seven books and has been a member of the Australian rowing team, a publican, an investment portfolio manager and spent nearly 14 years as an Australian Senator.
