Australia launches massive stimulus package
Australia launched a 42 billion dollar (26 billion US) stimulus package Tuesday and slashed interest rates to a 45-year low in a bid to battle the global economic crisis, which has choked growth.
Prime Minister Kevin Rudd said the massive stimulus package was aimed at nation building and supporting up to 90,000 jobs "in the face of the unfolding national and international economic emergency."
The government faced a "stark choice -- to act or fold its arms and let the free market rip," the centre-left Labor Party leader said. "The government has resolved to act and will continue to act."
The package includes spending of 28.8 billion Australian dollars on schools, housing and roads over four years, tax breaks for small businesses and cash handouts of 12.7 billion dollars to eligible workers, farmers and students.
Up to 950 dollars would be paid to workers earning 100,000 dollars or less, supporting up to 8.7 million individuals, the government said in a statement.
Similar amounts would be paid to single-income families, drought-affected farmers and others in need from March.
The government slashed its economic growth forecast by half, upped its estimate of job losses and warned the budget would plunge 22.5 billion dollars into deficit instead of achieving the 21.7 billion surplus predicted last May.
Gross domestic product growth is now expected to be 1.0 percent in 2008/09 and 0.75 percent the following year, compared with respective forecasts of 2.0 percent and 2.25 percent made just three months ago.
The unemployment rate is expected to surge to 7.0 percent in 2009/10 from 4.5 percent in December, the government said.
The latest stimulus package follows a pump-priming exercise in December which fed 10.4 billion dollars into the economy, targeting pensioners and others in a bid to boost consumer spending.
Adding to the new measures, Australia's central bank slashed interest rates by one percentage point to a 45-year low of 3.25 percent Tuesday, the latest in a series of aggressive cuts.
Reserve Bank governor Glenn Stevens said the board had taken the stimulus package into account in making its decision.
"The combination of expansionary monetary and fiscal policies now in place will help to cushion the Australian economy from the contractionary forces coming from abroad," he said.
The International Monetary Fund predicted last week that the Australian economy would contract by 0.2 percent in 2009 if no further measures were taken.
Preparing the way for the budget deficit announcement, Rudd on Monday said the global economic crisis and China's slowdown would punch a 115-billion-dollar hole in tax receipts over the next four years.
Demand in China and other Asian countries for Australian resources such as coal and iron ore has underpinned an economic boom for a decade.
Trade unions welcomed the stimulus plan but said more needed to be done to protect jobs.
Some analysts said the government could be too optimistic in forecasting that Australia would avoid a recession.
"They're unrealistic on their growth numbers but politically it's unpalatable to come out and say we're in recession," JP Morgan chief economist Stephen Walters told Dow Jones Newswires.
Katie Dean, a senior economist at Australia and New Zealand Banking Group Ltd., said the package may help avert a technical recession in the first half of 2009, but the long-term outlook was "still clouded".
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Australia launched a 42 billion dollar (26 billion US) stimulus package Tuesday and slashed interest rates to a 45-year low in a bid to battle the global economic crisis, which has choked growth.
Prime Minister Kevin Rudd said the massive stimulus package was aimed at nation building and supporting up to 90,000 jobs "in the face of the unfolding national and international economic emergency."
The government faced a "stark choice -- to act or fold its arms and let the free market rip," the centre-left Labor Party leader said. "The government has resolved to act and will continue to act."
The package includes spending of 28.8 billion Australian dollars on schools, housing and roads over four years, tax breaks for small businesses and cash handouts of 12.7 billion dollars to eligible workers, farmers and students.
Up to 950 dollars would be paid to workers earning 100,000 dollars or less, supporting up to 8.7 million individuals, the government said in a statement.
Similar amounts would be paid to single-income families, drought-affected farmers and others in need from March.
The government slashed its economic growth forecast by half, upped its estimate of job losses and warned the budget would plunge 22.5 billion dollars into deficit instead of achieving the 21.7 billion surplus predicted last May.
Gross domestic product growth is now expected to be 1.0 percent in 2008/09 and 0.75 percent the following year, compared with respective forecasts of 2.0 percent and 2.25 percent made just three months ago.
The unemployment rate is expected to surge to 7.0 percent in 2009/10 from 4.5 percent in December, the government said.
The latest stimulus package follows a pump-priming exercise in December which fed 10.4 billion dollars into the economy, targeting pensioners and others in a bid to boost consumer spending.
Adding to the new measures, Australia's central bank slashed interest rates by one percentage point to a 45-year low of 3.25 percent Tuesday, the latest in a series of aggressive cuts.
Reserve Bank governor Glenn Stevens said the board had taken the stimulus package into account in making its decision.
"The combination of expansionary monetary and fiscal policies now in place will help to cushion the Australian economy from the contractionary forces coming from abroad," he said.
The International Monetary Fund predicted last week that the Australian economy would contract by 0.2 percent in 2009 if no further measures were taken.
Preparing the way for the budget deficit announcement, Rudd on Monday said the global economic crisis and China's slowdown would punch a 115-billion-dollar hole in tax receipts over the next four years.
Demand in China and other Asian countries for Australian resources such as coal and iron ore has underpinned an economic boom for a decade.
Trade unions welcomed the stimulus plan but said more needed to be done to protect jobs.
Some analysts said the government could be too optimistic in forecasting that Australia would avoid a recession.
"They're unrealistic on their growth numbers but politically it's unpalatable to come out and say we're in recession," JP Morgan chief economist Stephen Walters told Dow Jones Newswires.
Katie Dean, a senior economist at Australia and New Zealand Banking Group Ltd., said the package may help avert a technical recession in the first half of 2009, but the long-term outlook was "still clouded".
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