12 Feb 2009
Feb. 12 (Bloomberg) -- Australia's Senate rejected a A$42 billion ($28 billion) stimulus package aimed to ensure the economy avoids its first recession in 18 years.The government failed to win support for its plans in the upper house of parliament, where it needed seven opposition or minor party votes to ensure passage. In a bid to win support, the government reduced one-off grants to income earners and diverted money toward projects proposed by the Australian Greens party.
"This is the only country that has considered an economic stimulus and had it defeated," Superannuation Minister Nick Sherry told the Senate today. "Further uncertainty and further delays -- things will get worse."
The government wanted to distribute A$12.7 billion in cash to families and low-income earners and spend A$28.8 billion on schools, roads, hospitals and energy efficiency. That would have sent the budget into deficit in the 12 months ending June 30, the first shortfall since the 2001-02 fiscal year.
The Reserve Bank of Australia last week cut the benchmark interest rate to 3.25 percent, the lowest since 1964, and the government since September has announced A$44.72 billion in spending to shield the A$1 trillion economy against the global financial crisis.
Independent Senator Nick Xenophon, whose vote was critical to pass the legislation, wanted spending to improve the Murray- Darling River system, which runs through his home state of South Australia. Farmers along the river system produce almost half of the nation agricultural output.
‘Must Say No'
"I must say no to this stimulus plan," Xenophon told the Senate in Canberra. "A credible stimulus package cannot ignore the Murray-Darling."
The vote in the Senate was tied, meaning automatic defeat of the legislation. Labor Senator Chris Evans said the government would reintroduce the laws as soon as possible.
Australia's economy grew 0.1 percent in the third quarter from a month earlier, the weakest pace in eight years. It expanded 1.9 percent from a year earlier.
By comparison, Japan's economy contracted 0.5 percent in the same period and the U.S. shrank 0.2 percent in the fourth quarter from a year earlier.
The economy would contract in 2009-10 without the stimulus, Treasury forecasts showed last week. The increased spending would have helped gross domestic product grow 1 percent this fiscal year and 0.75 in the year ending June 30, 2010, Treasury said.
Job Losses
Investment bank Macquarie Group Ltd. and miner BHP Billiton Ltd. are among companies firing workers, while job advertisements slumped for a ninth month in January, according to a report this week.
Australian employers added 1,200 jobs in January and the unemployment rate rose to 4.8 percent from 4.5 percent as more people looked for work, the Australian Bureau of Statistics said today.
Voter support for Rudd's Labor government increased after the package was unveiled last week, according to a Newspoll published in the Australian newspaper this week.
Support for Labor rose four percentage points to 58 percent, according to a poll of 1,133 people. The poll had a margin of error of plus or minus three percentage points.
