The Federal Governments $42bn stimulus package

Thursday February 5, 2009

The Federal Government has taken measures to slow Australia's progression towards recession with its recently announced $42 billion stimulus package. The stimulus package is designed to soften the effects of the approaching recession and focuses on schools, energy efficiency in homes, housing, community infrastructure and roads, and small business support.

The stimulus packaged, the second from the Labor Federal Government, will balance the allocated funds across families, investment in schools and infrastructure. The stimulus package has been set out so that for every $1 spent immediately in stimulating the economy, the government will invest over $2 on long term investments for future growth.

Prime Minister Kevin Rudd explained that the stimulus package was constructed in mind to protect 90,000 jobs over the next two years.

The $42 billion stimulus package is proposed to be divided into the following amounts:

$2.7 billion in business tax breaks

A temporary tax break has been offered for any businesses with a turnover of $2 million or less. These will now be able to claim an additional 30 per cent tax deduction. This involves deductions for eligible assets costing over $1000 bought before December 13 2008 to June 30 2009, but installed by June 30 2010. The $2.7 billion business tax breaks proposal should create strong pressure for future investments, support jobs and encourage economic activity.

$14.7 billion for Building the Education Revolution package

The Building the Education Revolution package will see schools receiving funding for large scale school infrastructures such as halls and libraries. Also, this package will have almost 500 language learning centres and science laboratories constructed for any school that satisfies the requirement criteria. Finally, every school nationwide will receive up to $200,000 for maintenance.

$6.4 billion in housing package

This package has several long term goals and benefits attached with the varying levels of the package. The $6.4 billion housing package will be divided up across several major projects and is expected to create up to 35,000 jobs.

To minimize future carbon emissions with households with 2.7 million homes receiving ceiling insulation to make a household more energy efficient.

Homeowners that don't fall into the 2.7 million homes category can also access the free product and installation. Each house will have the costs capped at $1,600 per house with renters being capped at $1,000.
Australian Defence Force personnel are to receive 20,000 new social housing dwellings and 802 new houses through the package.

$12.7 billion in individual payments

An overall value of $12.7 billion will be divided up into individual payments for people meeting certain criteria. Many Australians will receive a lump sum payment of $950 if they earn less than $100,000 per annum.

There will also be a $950 Back to School bonus allocated for low and middle income earners. This education related bonus will also be extended for students and those studying outside the workforce under the $950 Training and Learning bonus.

Drought affected farmers, farm dependant small business owners and single income families will also receive a $950 payment.

These payments are expected to financially benefit over 8.7 million Australians.

The individual payments are expected to financially assist individuals while stimulating the economy by stronger consumer activity in the short term while the nation building initiatives develop.

$890 million in community infrastructure upgrades

Improving community infrastructure and country roads will be allocated $890 million.

Mr. Wayne explained any future treasury prognosis without this stimulus may result in generating negative growth. The government said the magnitude of the stimulus will hopefully maximize investment flow and promote positive growth in that period.

After an epic 15 hour debate, the stimulus passed through parliament's lower house. Over the coming days the Senate's finance and public administration committee will perform its own examination.

For the stimulus package to be approved the government's borrowing limited would have to be increased from $75 billion to $200 billion in order to service debt. Even at a $200 billion in debt, this is still lower than many other countries in the form of a percentage of gross domestic product.

In related news, US President Barack Obama announced his US$819 billion economic stimulus package.

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