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Rudd unveils bigger stimulus
By Rod McGuirk |
February 4, 2009, Wednesday
|
Print Edition
Print Edition
AUSTRALIA'S Prime Minister unveiled a new stimulus package yesterday to try to shield the economy from the global downturn, promising A$42 billion (US$26 billion) in spending that will send the budget into the red for the first time in nearly a decade.
The package comes on top of one launched late last year worth A$10.4 billion and underscores the threat the downturn poses to Australia's resources-based economy, which has shuddered to a near halt since the worldwide financial turmoil began mid-last year.
Two hours after Prime Minister Kevin Rudd's stimulus announcement, the central bank slashed the benchmark cash rate by a full percentage point to 3.25 percent in another bid to reinvigorate the stagnating economy. It was the lowest level since the Reserve Bank of Australia took control of monetary policy 19 years ago, and the lowest money market rate since 1964.
The new initiatives, spread over four years, include building thousands of new houses and school rooms, and environmentally friendly measures such as providing householders with free home roof insulation.
The spending will plunge the annual budget into a A$22.5-billion deficit - 1.9 percent of gross domestic product - for the current fiscal year ending June 30, Rudd said.
"Nobody likes being in deficit and I don't like being in deficit at all," Rudd said. "This is not a question of choice. This is what we are required to do."
Temporary deficit
Doing nothing would result in even more job losses, Rudd said.
He said the plan aimed to support 90,000 jobs - through a combination of creating new positions and saving existing jobs - while boosting economic growth by half a percentage point to 1 percent in the current fiscal year. The plan also aims to turn an economic contraction in the following year to 0.75 percent growth, government documents said.
Rudd described the deficit as temporary, despite the Treasury's forecast that it would blow out to A$31.5 billion in the 2010-11 fiscal year.
"This government will never haul up the white flag on the inevitability of recession," he said. "There is no guarantee of success, but we will throw everything at this because we believe it is important for confidence and jobs that we do so."
By providing free ceiling insulation to 2.7 million Australian homes, the government plans to reduce household power bills as well as Australia's greenhouse gas emissions.
The scheme would save 49.4 million metric tons of greenhouse gas emissions that are blamed for dangerous global warming by 2020, documents said. An existing subsidy to householders for installing solar hot water systems would also be increased.
The package comes on top of one launched late last year worth A$10.4 billion and underscores the threat the downturn poses to Australia's resources-based economy, which has shuddered to a near halt since the worldwide financial turmoil began mid-last year.
Two hours after Prime Minister Kevin Rudd's stimulus announcement, the central bank slashed the benchmark cash rate by a full percentage point to 3.25 percent in another bid to reinvigorate the stagnating economy. It was the lowest level since the Reserve Bank of Australia took control of monetary policy 19 years ago, and the lowest money market rate since 1964.
The new initiatives, spread over four years, include building thousands of new houses and school rooms, and environmentally friendly measures such as providing householders with free home roof insulation.
The spending will plunge the annual budget into a A$22.5-billion deficit - 1.9 percent of gross domestic product - for the current fiscal year ending June 30, Rudd said.
"Nobody likes being in deficit and I don't like being in deficit at all," Rudd said. "This is not a question of choice. This is what we are required to do."
Temporary deficit
Doing nothing would result in even more job losses, Rudd said.
He said the plan aimed to support 90,000 jobs - through a combination of creating new positions and saving existing jobs - while boosting economic growth by half a percentage point to 1 percent in the current fiscal year. The plan also aims to turn an economic contraction in the following year to 0.75 percent growth, government documents said.
Rudd described the deficit as temporary, despite the Treasury's forecast that it would blow out to A$31.5 billion in the 2010-11 fiscal year.
"This government will never haul up the white flag on the inevitability of recession," he said. "There is no guarantee of success, but we will throw everything at this because we believe it is important for confidence and jobs that we do so."
By providing free ceiling insulation to 2.7 million Australian homes, the government plans to reduce household power bills as well as Australia's greenhouse gas emissions.
The scheme would save 49.4 million metric tons of greenhouse gas emissions that are blamed for dangerous global warming by 2020, documents said. An existing subsidy to householders for installing solar hot water systems would also be increased.
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