Australia And The U.S. Move In Oppisite Directions

(MoneyWatch)  Both the Australian and U.S. governments opted to stimulate their economies in this recession by reducing tax withholding on their citizens. This means that each paycheck there is a little more then normal. The idea was that with this more money people would spend it and spur the economy. If you remember last year the Bush Administration sent checks to people with the same hope.

Unlike in the U.S. the Australian money seems to have worked with the economy actually growing in the last quarter compared to the one before. In fact major retailers have gotten more optimistic for the year based on the results. In the U.S. it seems that most people have saved the money, or at least not used it to buy big ticket items.

In Australia as well they plan to cut taxes which may also be spurring people to spend. The U.S. does not plan anything like that, in fact the Obama Administration will raise taxes quite a bit next year when the Bush tax cuts expire. This thought might be making people consider saving their money rather then spending it.

Australia so far has weathered the downturn better then the U.S. In May it only had an unemployment rate of 5.7 percent compared to the U.S.'s 9.4. Of course that country has a much smaller population and economy with only losing less then ten thousand jobs this year compared to the almost three million that the U.S. has. This is another reason that people may be more optimistic there. There are some predictions that the Australian rate will be higher in June with some underemployment as well, but the official statistics are not out yet. The U.S. rate is also expected to go higher in June from May and Obama has predicted ten percent or more unemployment this year.

It may also be that the Australian government has been able to get its stimulus money to be spent on construction and transportation out into the economy faster. The U.S. "Stimulus" money seems to be lagging as it works it way through the system. Even with the predicted higher numbers for unemployment the U.S. would be in much better shape with Australia's performance. It might be interesting for the two governments to look at how things were done differently.