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Government unveils new stimulus package -

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Government unveils new stimulus package

The World Today - Tuesday, 3 February , 2009 12:38:00

Reporter: Lyndal Curtis

BRENDAN TREMBATH: The Federal Government has unveiled a $42-billion spending program against the
backdrop of sharply weakening economic growth and rapidly expanding budget deficits.

There are cash giveaways and spending on schools, roads and rail, communities and businesses. The
Government hopes the spending will keep growth positive, although the figures show it will be a
close run thing if it happens.

Chief political correspondent Lyndal Curtis has been in the lock up for the economic statement and
she joins us now in the Canberra studio.

BRENDAN TREMBATH: Well Lyndal why has the Government felt the need to come out with such a big

LYNDAL CURTIS: Well when you look at the picture of the economy painted by the Government, it's not
a pretty one. It says the outlook for the economy is that the economy will be significantly weaker
than it forecast just in November.

It says the global economic outlook has drastically deteriorated since November. It's been the most
extraordinarily synchronised slump in global activity in decades. It says almost all sectors face
significantly weaker growth and there's a much weaker outlook for growth than three months ago.

In fact it's predicting growth will be now down to just one per cent from the two per cent forecast
in November, and for this year, and virtually flat at 0.75 per cent next year. Unemployment is
forecast to be up to seven per cent by 2010 and employment growth is going backwards next financial
year. If not for the plan, growth would have been 0.5 per cent this year. The Government sources
say growth next year would be negative.

The sharp falls in revenue the Government's already announced plus spending measures today
including this one, will push the Budget well into deficit. The Budget this year, which was
forecast in November to be a $5.4-billion surplus, is now predicted to be a whopping $22.5-billion
deficit. That's not the end. There'll be $35-billion deficit racked up in the next two financial
years, and a $26-billion deficit in the year after that.

Now when you think back to the Budget where there was a sizable deficits predicted, that's a very
sharp turnaround in Government balance sheets in less than a year. The Government has outlined
something of a plan to return the Budget to Surplus, something the Opposition's been calling for.
It says when conditions improve and the economy grows above the trend, it will allow tax receipts
to recover naturally, it will keep tax as a share of GDP, lower than the average recorded in
'07/'08, and it will also hold real growth in spending to two per cent.

BRENDAN TREMBATH: So that's a huge amount of money. $42-billion worth. What sort of areas?

LYNDAL CURTIS: There are two strands to the spending. The Government's very keen that the spending
is temporary, targeted and timely. That's a formula the Treasury outlined when those mid-year
forecasts were announced. The Government's keen that the boost will be delivered where it's most

The first half of this year, that's where cash handouts that it's delivering will washout of the
system. The package doesn't deliver a permanent increase in Government spending, the Government was
very keen to stress that, as would happen with the generalised tax cut that Opposition's been
calling for. And the spending is targeted to get maximum bang for the buck. The Government's says
doing nothing is not an option so it's doing something to the tune of $42-billion, most of that
will be spent this year.

The first strand is the cash handouts. They'll happen by April. Some will take place from today,
when that washes out of the system, the second strand, nation-building, begins. The cash handouts
are worth $12.7-billion. Some households will get two bonuses, some will get even more.

There are bonuses for working Australians which will taper down and then cut out when you reach
$100,000 of income. That's $950, all the bonuses are worth $950. A single income family bonus for
families receiving Family Tax Benefit Part B, a back to school bonuses for each school-aged child
for people receiving Family Tax Benefit Part A, a farmer's hardship bonus for people are getting
income-support related to exceptional circumstances which is the sort of support farmers get in
drought. There will also be a training and learning bonus, also $950 each to students and other
people receiving income support to assist with education costs.

The nation-building and, I must stress, all of this spending apart from one part of the
nation-building is all new money and none of the nation-building funding comes from the big
nation-building funds that the Government announced in the Budget last year. So that's still
available to spend if it needs it. But it's spending $28.8-billion on infrastructure, $14.7-billion
on building or upgrading buildings in every one of Australia's 9,500 schools. Going to things like
assembly halls, libraries, indoor sports centres. So you can imagine the Education Minister's going
to be kept very busy opening things. They'll also be some money for secondary schools, and some
money for the maintenance for both, money which is brought forward for trades trading centres which
the Government announced in last year's Budget.

There'll be new money for social and defence housing, for public housing, the Government wants to
build around 20,000 new public houses by 2010 and also 800 new defence homes. The Government says
that will help create 15,000 jobs. There's also money for the repair of public housing, money as
we've heard for insulating homes and also an increase in solar hot water rebate, a tax break for
small business and for business to help them with their capital expenditure. And money for black
spots, regional roads, and also boom gates at railway crossings and some more money for community

Now the Government says this package will support and sustain 90,000 jobs in the next two years.
It's no longer saying it will create jobs, that's a definite change in the rhetoric and I think
reflects the reality that the Government knows it has to keep the jobs that it already has as well
as create jobs.

BRENDAN TREMBATH: Chief political correspondent Lyndal Curtis. A lot of ribbon-cutting ceremonies