THE Opposition wants the Government to end its economic stimulus plan. No way, says Treasurer Wayne Swan, we're not out of the woods yet.
Who's right? The Coalition has only its loyalists backing it on this. The International Monetary Fund, the OECD, the Treasury, the Reserve Bank and the economic profession agree: a stimulus was necessary, affordable - and it's worked.
Just two weeks ago, the IMF congratulated the Government, saying its ''timely policy response has effectively cushioned the impact of the global financial crisis on the Australian economy''.
Our economists mostly agree. In a paper for the Melbourne Institute, Max Corden dismissed fears that it would leave us with too much debt, noting: ''One is not causing a flood by hosing down a fire.''
But there have been many stimulus measures. Some are easier, and more appropriate, to wind back than others. Critics say the first home buyers boost is now doing more harm than good. The Reserve Bank wants the Government to end its guarantees of borrowing and deposits. It has also flagged interest rate rises.
What might happen? Let's look at the main measures:
1. THE CASH SPLASH
In December and April, Swan sent us cheques for $21.5 billion. The Reserve estimates we have spent half of that, boosting retail sales, and have saved half.
OPTIONS? None. The cash splashes are over.
2. FIRST HOME BUYERS BOOST
First home buyers grant raised temporarily from $7000 to $14,000 for existing homes, and $21,000 for new homes. This lasts until September 30. The boost will then be halved before it cuts out on December 31.
OPTIONS? End boost on September 30, at least for existing homes.
3. SOCIAL INFRASTRUCTURE
The February package pledged $22 billion to put up new school buildings, public housing and roadworks, and $4 billion to put insulation in homes.
OPTIONS? Most of the money is still unspent, but the programs are under way. If they end early, some schools and home owners would miss out.
4. ECONOMIC INFRASTRUCTURE
The Government has pledged to invest $22.5 billion in road, rail, ports, broadband, clean energy, hospitals, schools and universities, some of it brought forward.
OPTIONS? We could put things off or scrap them. But hey, don't we need this stuff?
5. CHEAP MONEY
The Reserve slashed its cash interest rate from 7.25 to 3 per cent, its lowest since 1961. That hasn't set credit growth alight, but struggling households are breathing easier.
OPTIONS? Markets believe the Reserve will start raising rates by December, with six next year.
6. LOAN GUARANTEES
The Government last October guaranteed bank deposits and loans to banks, which have responded by borrowing $150 billion. In March, it also guaranteed loans to state governments.
OPTIONS? Reserve Bank governor Glenn Stevens wants the guarantees to end as soon as possible, to restore normal discipline on borrowers.
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