3 Feb 2009

Australia unveils new stimulus package

8:10 pm on 3 February 2009

The Australian government unveiled a $A42 billion building and employment plan on Tuesday aimed at creating more jobs as the economy struggles in the face of the global slowdown.

The plan aims to retain 90,000 jobs over the next two years and insulate Australia against the worst of the world economic recession.

It includes spending on schools, housing, energy efficiency in homes, community infrastructure and roads, and support to small businesses.

The spending package comes in two stages.

First, the government will hand out almost $A13 billion in bonus payments. They include one-off payments of $A950 for 9 million workers earning below $A100,000, including farmers.

Some of the payments announced on Tuesday will be made this week, and others in March and April. Many students will also be eligible for a $A950 training and learning bonus.

The second stage is $A29 billion of spending on infrastructure projects, half of which is for new or upgraded buildings for every school. A further $A6.5 billion will be used to build 20,000 public houses.

The government also released updated figures showing weaker growth, higher unemployment and a $A22.5 billion deficit.

It unveiled a first $A10.4 billion stimulus in October, including payments to the elderly, low-income families and first-home buyers as consumer spending showed signs of shutting down.

Mr Swan said recessionary conditions worldwide had sparked a "dramatic collapse in demand", while the government on Monday said the slowdown was expected to strip $A115 billion from tax revenues.

Australia's economy has not suffered anything like the fallout seen in many developed countries and escaped an outright contraction, thanks in part to a still sound financial sector.

Rate cuts are also proving potent in that they have directly lowered most variable mortgage rates by almost 400 basis points, worth more than $A600 a month off average mortgage payments.

The government has also been in a position to help, having run budget surpluses for nine of the past 10 years.

The Reserve Bank of Australia on Tuesday cut its official benchmark interest rate by 1% to 3.25% - the lowest level in 45 years. Economists had expected a cut of at least 75 basis points.

The Australian sharemarket was higher at the close of trade, up 11.3 points, or 0.32%.