Big is not always better
IN my last column before Christmas, I reflected on what stimulation the Government's $10 billion package may have on the economy and business and now the results are in, and as many expected, very few businesses benefited and the predicted extra jobs creation did not occur.
The Government is now attempting to stimulate the economy with a further package, five times the size of the pre-Christmas hand out and have admitted they are not certain this will work.
I have no problem with the Government intervening in the commercial process in an attempt to help the economy, but I, along with other commentators, are concerned how knee-jerk reactions may have long term negative affects on local businesses.
As an example, I would point to the $3.9 billion home energy insulation component of the stimulus package which will provide home owners with a capped $1600 reimbursement for installing ceiling insulation.
Currently, Australian insulation manufacturing companies are running at 80 per cent capacity and they have admitted that they would be unable to keep up with the anticipated demand and this initiative would require importing the product from overseas to cover the increased demand.
Increased demand, lack of product and insufficient qualified/trained installers will increase the cost of insulating all properties, not only those that are claiming part of the $3.9 billion that the Government is handing out.
The trades in the construction industry are fairly balanced on need, and new entrants will be drawn from other areas and trades to fill the lucrative, sought-after insulation business. An imbalance occurs and other areas of the industry may suffer.
Finally, once the backlog of insulation installation has occurred, the excess workforce will have to return to their previous industry position that more than likely no longer exists. This is similar to the redundant, unemployed mining workers now returning to the eastern states in search of jobs.
More important for the insulation manufacturing industry, imports and other new and overseas companies that established themselves on the knee-jerk demand will have gained a foot- hold in this local industry.
This is not good for the local economy and perhaps more thought should have gone into the insulation program, such as phasing in insulation installation over time based on need or affordability.