Synchronized deficits in every developed ecomomy in the world. Nice huh? The 'crowding out' (private sector crimped, thanks to government expansion and absorbing liquidity i.e higher taxes) phenomenon is now, not later. In Australia there is a economic paradox thanks to fiscal stimulus, what happened was the housing sector ticked up after the government threw huge amounts of cash at the housing market. This is now been scaled back and by the end of December 2009 most of the housing grants will be gone.
Suffice to say, two things happed whilst the market re-inflated 1. the rental market started to open up (people left rental to purchase property) and 2. the office/commercial rental market maintained it's glut. You can see this, lease signs for both commercial/residential and sale signs for residential with sold on them. Think about the equation, it is most likely the majority of investors/purchases of property (namely residential) hold more liabilities than assets, let's say 80% liability to 20% cash. The goverment is essentially now trying to cool down the market, taking away housing stimulus, so we should see a lot of buyers equity diminish (demand collpases after stimulus withdrawal) fairly quickly; so with higher unemployment looming rental yields will not cover over leveraged buyers/investors - so at some point they will sell quickly otherwise they will be caught in a squeeze. This could essentially start the long overdue Australian mortgage meltdown. Despite Australia's stimulus (mortgage) leading to further credit chaos in the future. The big one is commercial (not just in Australia, but everywhere else), anyone that says to me that stimulus has saved the ecomomy is is not keeping up with reality, nothing was saved. The private sector is toast, go into your CBD, read up about the commercial property market and see for yourself it's oversupplied. Private investment into business is gone, private sector has shrunk dramatically.
Graph explains it all (US market):
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