Australia’s parliament narrowly passed a A$42 billion (US$28 billion) stimulus package yesterday in a bid to stave off recession in the face of the global economic crisis.
The parliamentary approval leaves the government free to immediately implement its spending plans, with Australian Prime Minister Kevin Rudd stressing the need for swift action throughout protracted negotiations during the bill’s passage.
Rudd was jubilant after parliament backed the plan, saying the package was in the national interest and would help Australia’s center-left Labor government fight the global economic recession.
“The most irresponsible thing to do today, with the worst global economic recession since the 1930s staring us in the face, would be to do nothing,” he told parliament.
The package includes spending of A$28.8 billion on schools, housing and roads over four years, tax breaks for small businesses and cash handouts of A$12.7 billion to eligible workers, farmers and students.
Rudd said the Australian Treasury estimated the plan would boost economic growth by 0.5 percentage points in from last year to this year and between 0.75 percentage points and 1 point from this year to next year, supporting up to 90,000 jobs.
“Without parliament’s support for this plan, growth would be slower and unemployment would be higher,” he said.
The Australian Senate, or upper house, had rejected the package late on Thursday when independent senator Nick Xenophon voted with the conservative opposition against the plan.
But Xenophon gave the package his crucial support yesterday, allowing the bill to sail through the government-dominated lower house.
Xenophon changed his stance after intense negotiations with the government that stretched through Thursday night and into yesterday morning.
The government finally won him over by pledging A$900 million in funds for the drought-stricken Murray-Darling river basin, which feeds into the senator’s home state of South Australia.
“I’ve persisted and I’m pleased to say I believe we have been able to reach a compromise that, while not giving everyone what they want, may give everyone what they need,” Xenophon said.
The opposition has labeled the stimulus package financially irresponsible and said it would drive the budget deep into deficit, saddling future generations with debts.
Opposition leader Malcolm Turnbull said the package, which includes a A$900 cash windfall for many taxpayers, was Rudd’s attempt to stave off recession using “collective retail therapy.”
“Our children and their children will pay for all of it,” he said. “The prime minister is plunging our nation into enormous and unprecedented debt. Billions of that debt will be incurred for measures that will have no enduring economic effect.”
JPMorgan economist Stephen Walters said the package’s passage was good for market confidence, even though it contained few surprises.