Federal election campaign information 2010: Did Australia spend too much averting the worst of the Global Financial Crisis?

All through 2009 we had a preview of one charge that the Coalition parties are going to level at the Rudd Government during the 2010 federal election campaign - that it spent far too much on stimulus packages used to mitigate the worst effects of the Global Financial Crisis.

This great graphic comes via the very astute Peter Martin, who in his turn picked it up from the Harvard Business Review.

Click here to enlarge

As can be easily seen, Australia spent only an estimated 0.1% of its 2008 GDP on economic intervention with no financial 'bail-out' component, which indicates a low level of national economic stress.
Compared to many other OECD countries Australia did rather well and appears to have been the first to bounce back and be considered economically stable again.
Leading the World Bank managing director Juan Jose Daboub to say that Australia can be a model for developing nations struggling to recover from the global financial crisis.

If relatively speaking Australia did not really overspend on its stimulus packages, did it need to spend at all?

Reserve Bank data to date shows that although consumer sentiment is high consumption is still hovering around 1997 levels and, even if the unemployment rate is considerably lower than in the 1990s it still underwent an uncomfortable rise throughout the global financial crisis.

Australian banks may have enjoyed healthy combined-total profits which only decreased momentarily in historical terms, but investment overall took a sharp dip and is only now starting to slowly rise.

Household assets showed a more dramatic version of this dip-rise and household debt as a percentage of disposable income is also not within comfortable limits.

The graph below indicates that Australia was not in an enviable situation after the global financial crisis struck and even with state and federal government stimulus packages there was a falling away of investment spending in sectors which tend to drive economic prosperity.

Conclusion? On balance the Rudd Government (whether by good luck or good management) successfully steered the country through a global crisis.