August 11, 2010

Stimulus spending controversy continues in Australia

CANBERRA, Australia

Prime Minister Julia Gillard defended the billions of dollars her government spent to stimulate Australia’s economy after a recently released report exposed inflated prices and mismanagement in a school building program.

Both the government and the opposition have attempted to make political mileage from the government-commissioned report as economic management emerges as a major issue ahead of Aug. 21 elections.

The program to provide every Australian school with a new building was the most costly initiative of the $52 billion Australian dollars ($48 billion) in economic stimulus spending packages rolled out by the government since late 2008 to counter the global economic downturn.

But the AU$16 billion schools program, implemented by Gillard as education minister before she ousted Prime Minister Kevin Rudd in an internal Labor Party coup in June, has been plagued by reports of money wasted on inflated construction contracts and unwanted buildings.

The interim report, commissioned in April to investigate whether the program was delivering value for money, found that most of the 254 complaints received about various school buildings “raise very valid concerns, particularly about value for money and the approach to school-level involvement in the decision making.”

But Gillard said the report endorsed the program, since the complaints came from fewer than three per cent of the schools that received buildings.

Economists have credited the stimulus spending with enabling the Australian economy to survive the global downturn with only a single quarter of contraction in late 2008.

Gillard said the cash injection into building ensured that Australia’s unemployment rate peaked below expectations at 5.8 per cent and was currently 5.1 per cent, while unemployment in the U.S. construction industry exceeded 20 per cent.

But opposition leader Tony Abbott blamed Gillard as education minister for “one of the all-time great wastes of public money.”

Canadian Press

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