LIFT OR DIE
- Nov 12, 2006
$42 billion spent to kickstart economy with Budget going into deficit and handouts for many
AUSTRALIANS' wallets will get a significant cash injection with handouts from the Government and reduced mortgage repayments.
Both the Government and the Reserve Bank acted decisively today with measures to counter the growing threat of a recession.
The Federal Government unveiled a $42 billion nation building and employment plan aimed at retaining 90,000 jobs over the next two years.
At 2.30pm (AEDT) the Reserve Bank cut the official interest rate to 3.25 per cent, the lowest rate in 35 years.
Billed as a "rapid response" to the deteriorating global economic conditions, the centrepiece of the Government's plan is $28.8 billion of spending on schools, housing, energy efficiency in homes, community infrastructure and roads, and support to small business to be delivered mostly in 2009-10 and 2010-11.
The remaining third of the plan is an immediate injection of $12.7 billion in one-off bonus payments of $950 each for low- and middle-income households and individuals through five bonuses to be paid in the next few weeks.
It means 8.7 million workers earning $100,000 or less will receive a lump sum payment of up to $950 each from April.
About 1.5 million single-income families will also receive the payment, provided they receive Family Tax Benefit Part B, in the fortnight beginning March 11.
But the bad news is the unemployment rate is predicted to rise to 7 per cent by mid-next year, up from 4.5 per cent in December.
The package includes:
- $12.7 billion for immediate one-off payments to working Australians, families with school-age children, farmers, single income families and for those undergoing training;
- $14.7 billion to be invested in school infrastructure and maintenance and bringing forward funding for trade training centres;
- $6.6 billion for to increase the national stock of public and community housing by about 20,000;
- $3.9 billion to provide free insulation to 2.7 million homes and solar hot water rebates;
- $890 million to fix regional roads and blackspots, to install railway boom gates and for regional and local government infrastructure;
- $2.7 billion small and general business tax break to provide deductions for some equipment purchases before the end of June 2009.
Budget into deficit
The Budget is now expected to sink into a $22.5 billion deficit in the 2008/09 financial year, a massive deterioration from the $5.4 billion surplus projected, and deepening into deficits of over $30 billion in the following two years.
Gross domestic product (GDP) is now expected to grow by just 1.0 per cent in the 2008/09 and by only 0.75 per cent the following year, compared with respective forecasts of 2.0 per cent and 2.25 per cent made in November.
Students, business also benefit
The Government will also provide a one-off $950 training and learning bonus for eligible students and people outside of the workforce returning to study to help with the costs of education and training.
The package, which is virtually a mini-budget in all but name, is the second major economic stimulus package announced by the Government since the $10.4 billion economic security strategy released in October.
It takes the total amount spent by the Government on stimulating the economy since September to $88.7 billion, including bank deposit guarantees, the car industry package, as well as investment in residential-backed mortgage securities, local government, infrastructure projects, and on the states through the Council of Australian Governments (COAG).
The statement said while the nation was in a better position than most other countries to weather the global recession, Australia could no longer "resist the pull of global economic forces".
The infrastructure spending in this package involves a major roll-out of $890 million to fix accident black spots, install rail boom gates, repair regional roads and build community infrastructure such as libraries, town halls, community centres and sport centres.
Schools around Australia will benefit from $14.7 billion over three years to construct school halls, libraries, indoor sports facilities and performing arts centres.
The package includes funds of between $250,000 and $3 million for primary schools for capital expenditure projects and $1 billion for the construction of science and language laboratories in secondary schools, while all schools will be able to apply for extra funding of between $50,000 and $200,000 for minor maintenance and infrastructure.
Public and community housing will receive a $6 billion boost to allow for the construction of about 20,000 new homes to be completed by December 2010.
Small business also gets $2.7 billion in extra tax breaks aimed at supporting jobs.