Australia pledges A$42b stimulus plan as economy slows

Tuesday 3rd February 2009

Australia will spend A$42 billion on a fiscal stimulus package to buffer the nation from the global recession, helping creating up to 90,000 jobs, build homes, make family benefit payments and grant tax breaks.

Stocks rallied, sending the S&P/ASX 200 Index up 1.6%, with retailers among the gainers on prospects for increased consumer spending. The four-year spending plan will plunge the federal government into a A$22.5 billion budget deficit, the price of lifting gross domestic product by an estimated 0.5% in fiscal 2009 and up to 1% in 2010. Without the package, the economy was expected to contract this year, based on Treasury estimates.

"The weight of the global recession is now bearing down on the Australian economy," Treasurer Waynbe Swan said in Canberra today. "It would be irresponsible not to act swiftly."

The deficit is a turnaround from the A$21.7 billion surplus Swan forecast in his 2008 budget. The spending includes A$14.7 billion for schools and A$6.6 billion building 20,000 new social and defence homes. The deficits will rise to A$35.5 billion in 2010 and A$34.3 billion in 2011.

A further A$3.9 billion will be spent insulating 2.7 million homes and A$890 million wil go on infrastructure and road repairs. Some A$12.7 billion is allocated for grants for needy families, low-income workers and trainees, while tax breaks for small businesses will amount to A$2.7 billion.

The fiscal stimulus package is the second for Australia.

By Jonathan Underhill

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