CANBERRA (Reuters) - The Australian government unveiled an emergency A$10.4 billion ($7.3 billion) stimulus package on Tuesday to guard the economy from a global slowdown and boost consumer confidence.
Prime Minister Kevin Rudd announced the package, worth about one percent of gross domestic product, just two days after the government guaranteed all bank deposits for three years, and wholesale funding to Australian banks, to protect the banks from fallout from the global credit crisis.
“The global financial crisis has entered into a new, dangerous and damaging phase, one which goes to the real economy, growth and jobs. That’s why the government has decided to act decisively and early,” Rudd told reporters.
Australia’s move came as Japan unveiled steps to stabilize its financial markets, lawmakers in the United States pushed for a new stimulus package to head off recession, and authorities in Europe moved to shore up their banks.
Japan, the world’s second-largest economy, last month also announced a package to help small businesses and individuals cope with high oil and food prices, including 1.8 trillion yen ($16.8 billion) in new spending -- roughly 0.4 percent of GDP.
China has also increased value added tax rebates to textile exporters, and state newspapers say contingency planning for a fiscal stimulus package is under way.
The Australian stimulus package delivers pre-Christmas cash payments to pensioners and low and middle income earners to help fight sagging consumer confidence in Australia, and provides A$1.5 billion to bolster the country’s housing and home building markets.
The package comes a week after Australia’s central bank cut official interest rates by 100 basis points to insulate the economy from a global meltdown, but analysts said the new package would not stop further rate cuts by the Reserve Bank of Australia (RBA).
“The stimulus package is very helpful given the deteriorating conditions in the global economy,” said Rory Robertson, interest rate strategist at Macquarie Bank. “I still expect the RBA to go with half a percentage point cut in both November and December as these are extraordinary times.”
Rudd said the Australian economy remained strong and was better placed to than most nations, but it could not be immune from the impact of the global credit crisis.
Under the package, single pensioners will receive a lump-sum payment of A$1,400, while pensioners in a couple would receive A$2,100.
Low and middle income families will receive a one-off payment of A$1,000 for each child in their care. The family payments and pension payments will be made from December 8, and in time to help bolster pre-Christmas sales.
The government will also double the grant for first home buyers from A$7,000 to A$14,000, or an extra A$14,000 for first home buyers who buy a newly-constructed house to take their home buyers grant to A$21,000.
Australia has delivered surplus budgets in 10 of the past 11 years, and in its May budget forecast a surplus of A$21.7 billion for the 2008-09 financial year, with economic growth to be 2.75 percent for the year.
Rudd said the A$10.4 billion strategy would be fully funded from the budget. He gave no updated budget forecasts, but said the budget would remain in surplus. He said the government would issue its mid-year budget update by mid-November.
Australia’s economy is in its 17th year of growth, due to a resources boom fueled by demand from China.
“All advice currently available to the Rudd Government is that the Australian economy will continue to experience positive economic growth,” Rudd and Treasurer Wayne Swan said in a joint statement.
(Additional reporting by Rob Taylor and Anirban Nag)
Editing by Kazunori Takada
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