The Prime Minister, Kevin Rudd, has announced a new package of measures worth $42 billion to stimulate the economy.
At a press conference in Canberra, Rudd announced a series of direct payments to individuals and families, coupled with a program of infrastructure funding for housing and schools.
A home insulation program will be introduced, as will a program of new and upgraded buildings in schools, to be called Building the Education Revolution. A $950.00 one-off cash bonus will be provided to support jobs. There will be a black spots, boom gates, regional roads and community infrastructure program.
Full details of the stimulus package are shown below.
- Listen to Rudd’s press conference (29m – transcript below)
- Watch an extract of Rudd’s press conference (3m)
Text of statement released by Prime Minister Kevin Rudd.
$42 billion nation building and jobs plan
The Rudd Government today announced a $42 billion Nation Building and Jobs Plan to support jobs and invest in future long term economic growth.
This historic long term and targeted Nation Building and Jobs Plan is a further decisive step in the Government’s response to the severe global recession.
Treasury estimates that today’s Nation Building and Jobs Plan will support up to 90,000 jobs in 2008-09 and 2009-10.
Key measures funded by today’s Nation Building and Jobs Plan include:
* Free ceiling insulation for around 2.7 million Australian homes
* Build or upgrade a building in every one of Australia’s 9,540 schools
* Build more than 20,000 new social and defence homes
* $950 one off cash payments to eligible families, single workers, students, drought effected farmers and others
* A temporary business investment tax break for small and general businesses buying eligible assets
* Significantly increase funding for local community infrastructure and local road projects
The initiatives in the Nation Building and Jobs Plan will provide a boost to economic growth of around ½ per cent of GDP in 2008-09 and around ¾ per cent to 1 per cent of GDP in 2009-10.
By investing in jobs and long term economic growth the Plan strikes the right balance between immediate support for jobs now, and delivering the long term investments needed to strengthen future economic growth.
For every $1 spent providing immediate stimulus to the economy the Government has invested more than $2 on long term investments that will generate future economic growth.
The Global Recession
The world is now caught in the worst economic crisis since the Second World War, a crisis that has delivered recessions in the United States, the United Kingdom, Japan and the Eurozone.
The IMF is now forecasting advanced economies to contract by 2 per cent collectively in 2009. Growth has also slowed dramatically in key emerging economies, China in particular. All these factors have caused a rapid unwinding of the mining boom in Australia, with major consequences for Australian revenues, growth and jobs.
In fact the global recession has already pushed the Budget into deficit, even before policy action is taken. Decisive action is now required to strengthen the Australian economy and in these circumstances, a temporary deficit is the only responsible course of action to support jobs and economic growth.
National action alone cannot reverse the global forces buffeting the Australian economy; these global forces can only be fully turned around with a coordinate global response.
Long Term Nation Building Investments
Direct investment by the Government in goods and services has significant scope to boost economic growth and productivity and support jobs because it adds directly to demand. There are five major components of the Nation Building and Jobs plan.
Building the Education Revolution
* Build or upgrade large scale infrastructure, such as libraries and halls in every primary school, special school, and K-12s school in Australia.
* Build 500 new science laboratories and language learning centres in schools that can demonstrate need.
* Up to $200,000 to every Australian school for maintenance and renewal of school buildings.
Energy Efficient Homes
* Installing ceiling insulation in 2.7 million Australian homes which will cut around $200 per year off the energy bills of these households
* Reduce greenhouse gas emissions by around 49.4 million tonnes by 2020, the equivalent of taking more than 1 million cars off the road
20,000 Social and Defence Homes
* Build 20,000 new social housing dwellings and 802 new houses for the Australian Defence Force.
* Urgent maintenance to upgrade around 2,500 vacant social houses
Small Businesses and General Business Tax Break
* A 30 cent in every dollar investment tax break for small and general businesses buying eligible assets.
Black Spots, Boom Gates, Regional Roads and Community Infrastructure
* 350 additional projects in the Black Spot Program and the installation of around 200 new boom gates at high risk rail crossings
* $650 million funding boost for local community infrastructure and maintenance on Australia’s national highways
Immediate Stimulus to Support Jobs and Economic Growth
Targeted bonuses to low and middle income households will provide an immediate stimulus to the economy and support Australian jobs. In conjunction with the payments delivered as part of the $10.4 billion Economic Security Strategy announced in October, these measures have been designed to assist those groups most affected by the flow-on effects of the global recession.
The five one off cash bonuses includes in today’s plan are the:
* Tax Bonus for Working Australians of up to $950 paid to every eligible Australian worker earning $100,000 or less. This will support up to 8.7 million individuals.
* $950 Single Income Family Bonus to support 1.5 million families with one main income earner.
* $950 Farmers’ Hardship Bonus paid to around 21,500 drought affected farmers and farm dependent small business owners receiving exceptional circumstances related income support.
* $950 per child Back to School Bonus to support 2.8 million children from low- and middle-income families.
* $950 Training and Learning Bonus paid to students and people outside of the workforce returning to study to help with the costs of education and training.
The $42 billion Nation Building and Jobs Plan builds on the stimulus measures already in place to support economic activity and jobs.
Stimulus measures already implemented by the Rudd Government include the $10.4 billion Economic Security Strategy, the $300 million program to build local community infrastructure, the $15.2 billion COAG funding package and the Nation Building Package announced in December 2008.
Text of statement released by Prime Minister Kevin Rudd.
$950 One-off Cash Bonus to Support Jobs
The Rudd Government today announced five key $950 one-off payments for low and middle income households and individuals.
The Government is providing these cash payments to immediately support jobs and strengthen the Australian economy during a severe global recession.
These targeted cash bonuses are a key element of the Government’s $42 billion Nation Building and Jobs Plan to support up to 90,000 Australian jobs.
To immediately stimulate the economy in the shortest possible time, five groups of one-off cash bonuses will be paid in March and April 2009.
These five key bonuses include a:
* Tax Bonus for Working Australians of up to $950 paid to every eligible Australian worker earning $100,000 or less. This will support up to 8.7 million individuals.
* $950 Single Income Family Bonus to support 1.5 million families with one main income earner.
* $950 Farmers’ Hardship Bonus paid to around 21,500 drought affected farmers and farm dependent small business owners receiving exceptional circumstances related income support.
* $950 per child Back to School Bonus to support 2.8 million children from low- and middle-income families.
* $950 Training and Learning Bonus paid to students and people outside of the workforce returning to study to help with the costs of education and training.
To support jobs in the middle of a severe global recession the Government must stimulate the economy in the most immediate manner possible.
That is why one off cash bonuses to people and families who are doing it toughest are a key part of our Nation Building and Jobs Plan.
These one off cash bonuses reflect the weight of economic authority – including the advice of the International Monetary Fund – that targeted one off payments rather than generalised tax cuts spread over a lengthy period are more likely to be consumed, and thus provide a more effective economic stimulus and provide more support for Australian jobs.
There will be no quick fixes, but the Government is determined to act swiftly and decisively to support Australian households, growth and jobs.
These cash bonuses will stimulate consumption quickly, supporting economic activity and jobs until our nation building initiatives have an impact.
This $12.7 billion package is a major economic initiative to deal with these extraordinary economic times and is in addition to the Economic Security Strategy that the Rudd Government delivered in December 2008.
Tax Bonus for Working Australians
The Government will provide an up-front, lump-sum tax bonus of up to $950 to around 8.7 million Australian workers earning $100,000 or less.
A lump-sum payment of up to $950 will be made to eligible taxpayers from April 2009. The bonus will be available to Australian resident taxpayers who paid tax in the 2007-08 financial year after taking into account available tax offsets and credits.
The bonus is subject to an income threshold test which determines that a:
* $950 bonus will be paid to eligible taxpayers with a taxable income of up to and including $80,000;
* $650 bonus will paid to eligible taxpayers with taxable incomes exceeding $80,000 and up to $90,000; and
* $300 bonus will be paid to eligible taxpayers with incomes exceeding $90,000 up to and including $100,000.
Taxpayers will not need to apply for the payment. The Australian Taxation Office will automatically make the payment after determining eligibility.
Single Income Family Bonus
The Government’s Single income Family Bonus will provide an up-front, one-off bonus payment of $950 to approximately 1.5 million families who receive Family Tax Benefit Part B (FTB-B). The bonus is intended to provide additional assistance to families with children that have one main income earner.
The payments, which will be made automatically by Centrelink in the fortnight commencing 11 March 2009, will be non-taxable and will not be counted as income for social security purposes.
The small number of families who claim FTB-B as a lump sum, will receive their one-off payments from Centrelink in 2009-10 and 2010-11 after their 2008-09 tax returns have been processed by the Australian Taxation Office.
Families who are eligible for FTB-B on 3 February 2009 will receive the Single Income Family Bonus.
Farmer’s Hardship Bonus
The Government will provide $20.4 million in 2008-09 for an up-front, one-off payment to farmers and rural-dependent small business owners receiving exceptional circumstances related income support.
A lump-sum payment of $950 will be made to people who, on 3 February 2009, are receiving:
* Exceptional Circumstances Relief Payment for Farmers;
* Exceptional Circumstances Relief Payment for Small Business;
* Interim Income Support for Farmers;
* Interim Income Support for Small Business;
* Transitional Income Support; or
* Farm Help Income Support.
The payments will be made in the fortnight commencing 24 March 2009, to approximately 21,500 recipients and will provide additional support to groups of Australians who are in hardship. These payments will not be taxable and will not be counted as income for social security purposes.
Back to School Bonus
The Government’s $950 Back to School Bonus will provide a one-off, up-front bonus to be paid to families eligible for Family Tax Benefit Part A (FTB-A) on 3 February 2009 for each eligible child of school age (aged 4 to 18 on 3 February 2009).
This will help meet education costs for the 2009 academic year and is in addition to and separate from the Education Tax Refund.
The Back to School Bonus is expected to help 2.76 million children aged 4 to 18 in just over 1.5 million families across Australia.
Training and Learning Bonus
The Government’s $511 million Training and Learning Bonus provides an up-front, one off bonus to eligible students to assist with the costs for the 2009 academic year. It also provides a temporary (until June 2010) additional incentive for social security recipients to return to education and training.
The Training and Learning Bonus consists of two categories:
Category 1
* A one-off $950 bonus for recipients of: Youth Allowance (students and apprentices); Austudy; ABSTUDY and related payments
* The one-off bonus will also be available to recipients of Sickness Allowance and Special Benefit (under age pension age).
* If a student attracts the Government’s Back to School Bonus they are not eligible for the one-off $950 Learning and Training Bonus.
Category 2
* A temporary supplement (from 1 January 2009 to 30 June 2010) to the Education Entry Payment (EdEP) of $950. This is in addition to the existing EdEP payment of $208, which provides assistance with the costs of training courses, for income support recipients who are returning to study.
* A temporary extension (from 1 January 2009 to 30 June 2010) of the EdEP to Youth allowance (other); and
* A temporary relaxation (from 1 January 2009 to 30 June 2010) of the requirement that recipients must have been receiving social security payments from 12 months to 1 month.
Around 440,000 students and people returning to study will be paid this one off cash bonus.
Text of statement released by Prime Minister Kevin Rudd.
Macroeconomic And Fiscal Outlook
The Rudd Government is acting decisively to strengthen growth and support Australian jobs in the face of the deepest global recession since World War II.
The global financial crisis has driven almost all major advanced economies into recession. The key emerging economies of China and India are now also slowing sharply.
The global commodity boom which has provided significant stimulus to the Australian economy over recent years has come to an end. No country will escape the impacts of the global recession, which is causing falls in growth, job losses and budget deficits right across the world. The weight of the global recession is now bearing down on the Australian economy. Economic growth is slowing and employment will weaken.
That’s why the Rudd Government is implementing a $42 billion Nation Building and Jobs Plan to provide immediate support for jobs and growth. The Plan will add around ½ of one per cent to GDP growth in 2008-09 and around ¾ to 1 per cent to GDP growth in 2009-10, and support up to 90,000 jobs over the next 2 years. In the midst of this global recession it would be irresponsible not to act swiftly and decisively to support jobs and invest in nation building.
The Nation Building and Jobs Plan has been crafted to strike the right balance between supporting growth and jobs now, and delivering the lasting investments needed to strengthen the economy for the future. The global recession, dramatic slowing in China and unwinding of the commodity boom has now wiped a total of $115 billion from budget revenues and pushed the budget into deficit.
A budget deficit is now forecast for 2008-09 of $22.5 billion (1.9 per cent of GDP). The global recession has hit budgets hard all around the world, with the IMF now forecasting a collective budget deficit of 7 per cent of GDP for advanced economies. The Government reaffirms its commitment to deliver budget surpluses, on average, over the course of the economic cycle.
As the economy recovers, and grows above trend, the Government will take action to return the budget to surplus by:
* banking any increase in tax receipts associated with the economic recovery, while maintaining its commitment to keep tax as a share of the economy on average below the level it inherited; and
* holding real spending growth to 2 per cent a year.
In the face of these extraordinary global conditions, the immediate and overriding priority for fiscal policy must be to support growth and jobs. There will be no quick fix to this global recession and many of its effects are still to be felt – but the Rudd Government is taking the necessary and responsible action to help see Australia through this global crisis.
Transcript of Kevin Rudd, Wayne Swan and Lindsay Tanner press conference.
RUDD: Because Australia is facing an unfolding national and international economic emergency, the Government of Australia is today launching an unprecedented $42 billion Nation Building and Jobs Plan to support jobs and to invest in Australia’s long term economic future.
Australia faces a very stark choice. That is whether government acts, seeks to intervene to reduce the impact of this unfolding global economic recession, or the alternative which is for government simply to fold its arms and to allow the free market to let rip.
Well this government has charted its course of action and is resolved to act, and it will continue to act. The government cannot reverse of course the impacts of a global recession, but this government will move heaven and earth to reduce the impact of that global recession on Australia.
Nearly three quarters of this $42 billion plan is directed towards nation building and support for business. First and foremost within this nation building plan, is the single largest school modernisation program in Australia’s history. This investment in every one of the nation’s seven and a half thousand primary schools is designed to build the primary schools we need for the 21st century. It’s building the education revolution. Each one of the nation’s 7,500 primary schools will be funded to invest in either a 21st century library or a multipurpose hall or classroom modernisation.
Added to the investment we will make in secondary schools, a further billion dollar program where secondary schools can apply for funding for new science wings and new language laboratories to the tune of $1 billion and an additional school maintenance program to assist with those things which P&C’s and P&F’s need now. This is a massive education, a massive investment into the nation’s school education system.
Second, the government some time ago said that we were committed to halving homelessness. If you look at the census data, we have around the nation according to the census data some 100 thousand people who are homeless. Our advice is that given the concentration of households represented within that, represented something like a 80 thousand deficiency in the total national housing, social housing stock.
Therefore applying our previous policy commitment by 2020 to halve homelessness, that would mean adding an additional 40 thousand to the social housing stock of the nation. In this program over the next two to three years we’re going to get half way there by building 20 thousand additional units of social housing, and through an associated maintenance package of some $400 million, bring also on stream some 2,500 units of social housing stock which is simply at present not up to scratch. This again is a concrete measure, some $6 billion worth, aimed at providing stimulus to the economy and contribute to the long term policy goals of the Government.
And third is this: what do we do in terms of the practical challenges of energy efficiency to reduce greenhouse gas emissions to deal with the long term challenge of climate change. The Government’s advice has been that the single most effective measure in terms of household energy efficiency is insulation.
We’re also advised that more than two million households across the country, houses across the country, owner occupied dwellings, do not have insulation. The Government’s objective through this program is to have all owner occupied houses in the country insulated. The greenhouse gas emission impact of that will be to reduce total greenhouse gas emissions by some 49 million tonnes of carbon equivalent. That’s the equivalent of taking one million cars off the road. This is a very useful thing for the planet, for greenhouse gas emissions, but beyond that as well, stimulus in the economy.
These are three very practical nation building measures. We spent a lot of time working our way through these because the practical challenge we faced is this: how do you mesh intensive investments in nation building measures now to provide the necessary additional stimulus to the economy and jobs now, in order to make a difference now. By which we mean, in the next year or two. And hence you will see the concentration of those construction programs are made within that overall timeframe.
Also you will see outlined in the document our commitment to a further significant direct assistance to small business and to business. Now you have a temporary investment allowance of some 30 per cent, and for it to be applicable in the case of small businesses for any capital acquisition, north of $1000.
The objective is to make it possible, more possible for small businesses to make those capital purchases that they need to keep their businesses running, but to do so with confidence looking ahead about what their cash flow will be as a result of making those purchases. And this sits on top of the existing announcement of last December about a 10 per cent special investment allowance for a more extended period of time.
Finally, there are also measures here which are outlined in the document to support households and to support households under budgetary pressure and households’ necessary role in consumption. I know there’s been a lot of criticism about consumption measures. I’d suggest strongly that support for households in consumption is important in the overall mix of measures in underpinning economic activity in the immediate period ahead.
Again in summary, about three quarters of the measures here are about nation building, are about support for business, and something a little more than a quarter of them are support for households. Taken together, they are designed to provide necessary support and stimulus for the economy.
The economic rationale for this package of measures is again outlined in the document. If you looked carefully at the Treasury prognosis for the period ahead, minus this stimulus package, it would be quite clear that the economy would run a grave risk of generating negative growth, most particularly in the 09/10 financial year. Therefore the challenge that we have faced is, what measures assist in providing necessary fiscal stimulus to give us a much greater prospect of generating positive growth in that period. That’s why we have embraced the measures we had in the magnitude that we have and in the construction that we have put to maximise the flow through of investment in the year ahead, and just beyond.
On unemployment, the document also is clear that this package of measures is designed to support up to 90,000 jobs in ‘09 and ‘10. The document is equally clear that unemployment by Treasury is estimated to rise from where it is now at 4.5 per cent to 7 per cent. 4.5 per cent unemployment now is some 500,000. 7 per cent would mean an additional 300,000. Treasury further estimate that one third of that 300,000 would be made up of individuals losing their jobs, two thirds made up of individuals unable to access the labour market.
The impact of the measures that we have put forward, as I said, represent support for 90,000 jobs. I indicated also in my remarks to you yesterday that the Government will take further measures in relation to labour market programs which will be relevant to our overall meeting of the challenge of the jobless matter for all Australians.
Finally, on the question of the deficit itself. Nobody likes being in deficit and I don’t like being in deficit at all. This is not a question of choice. This is what we’re required to do. The key question is our exit strategy from deficit in the medium term.
The clear policy articulated in the Government’s statement today provides a policy framework for explaining how we will return the budget to surplus over time.
One, as I indicated to you yesterday, that when economic growth resumes at trend or above, action will then be taken to restore the budget to surplus. Two, taxation revenues, additional taxation revenues which then flow at a time when economic growth has returned to trend and above, would then be dedicated to restoring the surplus. And three, future discretionary expenditure would be limited to two per cent per year into the future. This is the doctrine that we embrace here formally for returning the budget to surplus.
Nobody knows how long and deep this part of the economic cycle will be, what I have articulated to you over is our strategy for returning the budget to surplus once trend and above trend growth resumes.
Finally, this plan is part of our strategy to see Australia through this economic crisis, a crisis not of Australia’s making. We believe it is a strategy in which the nation can have confidence. There is much lack of confidence across the world and our own country today because of the avalanche of bad news on people’s television sets, in their radio stations, in their newspapers.
This strategy, this plan today as part of a broad strategy on which we have embarked last year, provides a basis to see Australia through this economic crisis. It is a strategy in which the nation can have confidence and as I have said before it is a strategy to which we will add in the future as is necessary.
The Government remains determined to take whatever further measures are necessary to continue to support growth and jobs and the stability of financial markets into the future.
There is no silver bullet with any of this. I have not the slightest intention of misleading the Australian people on this. This represents a strategy on our part and a plan on our part to reduce the impact of this global economic recession on the Australian economy, on growth and on jobs and on household incomes.
It does not represent the removal of the problem. It is our best effort to reduce the problem but we remain resolved to take whatever further action is necessary in the future.
JOURNALIST: [inaudible] When you announced the ESS you were talking about the $10 billion in Government spending creating jobs. Today you are talking about spending supporting jobs, can you explain the difference between those two terms?
RUDD: Well when you’re supporting jobs you’re doing either of two things. You’re either creating additional direct jobs through public sector activity or supporting the retention of jobs which currently exist within firms or elsewhere in the economy. That is simply a broader concept and it just describes the reality.
By the way in terms of the ESS and its capacity to generate jobs, I would just draw your attention to what Westfield has released today as well. Spending in the month of December in 2008 was up 2.5 per cent from the previous year. This is in contrast to their overseas sales which was down 14 per cent in the United States and 7 per cent in New Zealand. And that is one part of a complex picture, one part of an overall plan, of which a further instalment is revealed today.
JOURNALIST: In terms of the exit strategy, when you say that those, the new [inaudible] when growth returns to trend. What exactly does that mean?
RUDD: Well it is when trend growth returns. Trend growth is normally defined at around three. When trend growth to the economy resumes at that or above, that’s when the, this doctrine applies and the principles that we’ve articulated. And I think that’s a responsible course of action.
It puts a necessary doctrinal constraint on the future public finance behaviour of the Government and it’s entirely consistent with the doctrine of financial constraint we imposed upon ourselves prior to being elected, which is to support a budget surplus across the economic cycle.
JOURNALIST: Mr Rudd, the document mentions the need for the states to sort of follow your lead in this area and it notes that if they don’t you’ll look at it through COAG. To what extent have your meetings in the last week or so, with state premiers created a pact so that they won’t be doing things in their budgets that run counter to your aims and policies and doctrine?
RUDD: This Government will adopt a zero tolerance approach to any State Government whatever its political complexion, to any substitution of effort, let’s be very clear about that.
The whole purpose of this extraordinary package, designed for these extraordinary times is through public demand, to offset the contraction in private demand within the economy, so that we minimise the overall effect on households and jobs.
Therefore it makes no sense whatsoever for us to up our effort and for the States then to withdraw theirs in order to repair their bottom line or whatever.
We will take an absolute hard line on this with the following consequences. First, when we engage the states on the implementation of each arm of this plan, this $42 billion plan, on the implementation, we through Treasury officials will exchange in detail, what is in the state governments’ budgets forward estimates for their capital works for the entire forward estimates period: in social housing, in school construction and in any other relevant area.
Secondly, if we through those Treasury processes detect, observe any withdrawal of effort against that benchmark: A, I will make that public myself. Secondly, an equivalent amount of money will be withdrawn from those states’ future general revenue grants. We are hardline on this.
Furthermore we’ll be speaking with the states directly about the implementation timetable for each of the public investment programs involved in this $42 billion plan. Particularly the school modernisation plan as well as the social housing plan which I referred to before.
JOURNALIST: Prime Minister, I know you’ve quoted some comments from Woolworths on this but to what extent is the speed of this recession, has the speed of this recession forced you to craft a $42 billion package? In particular the $12.7 billion or whatever it is in quick payments.
Has forced you to craft that package without really having anything like the data, you would like to know whether the first package did the job it was supposed to do. You’re working in the blind here to an extent, aren’t you?
RUDD: When we had this debate last year about how or whether the Government could respond to the unfolding economic crisis, the debate devolved down to essentially two sets of arguments. One was, wait for all the data to come in, by which stage it is usually too late to have an effect. Or two, act now, knowing that there are still uncertainties into the future.
Secondly, therefore, what the Government has done is saying, here is a global recession. here is the further deterioration in the global economy, reflected in the data over the last several months.
Here therefore, based on Treasury advice, is the likely further gap in growth, in the Australian national accounts, and therefore, what do we need to do by way of investment to seek to fill that gap.
Then it is a question of what can you do most quickly and most productively to fill that gap. And to do two things: one, provide the necessary stimulus now in the shorter term and secondly, wherever possible, mesh that with long term infrastructure which the nation needs.
Our schools will be great beneficiaries from what will be the biggest school modernisation program in the nation’s history. Every primary school in Australia is going to become a centre of economic activity, every one of them. Every one of them.
And that is what we intend to do. 7500 centres of economic activity. And you know something, rolling this out is going to take a feat of national organisation and planning, we haven’t seen since the ‘40’s.
JOURNALIST: (inaudible) labour market programs, if we are looking at 7 per cent unemployment, shouldn’t the labour market programs be included in today’s statement? Is there a reason why they are not and what kind of labour market programs do you have in mind?
RUDD: I may have said this yesterday, but this is intensely complex work to make sure that labour market programs are tailored not just to emerging national data, but are regionally and locally applicable as well. We are determined to get this as right as possible.
It is going to take a bit more time. We know the dimensions of the challenge. Remember, I referred here already to Treasury’s advice that some 200,000 people, based on the projections out to 2010, under current circumstances, would not be able to enter the labour market.
Our challenge therefore, is to meet that huge challenge, that huge task.
It is complex, it is hard, it is detailed. And we are working our way through it. And I would much rather we got it as right as possible, rather than produce a press release, which doesn’t have the necessary implementation machinery behind it. We haven’t done this sort of work, at the Commonwealth level, for a long, long time.
JOURNALIST: Mr Rudd are you limited about what you can do on the labour market programs because there are tenders out for the Job Network at the moment? Is there, are you compromised by that process or could you do something additionally?
RUDD: Well labour market programs as a concept are broader than what the Job Network itself does. And in terms of the intrinsic of what happens to be in the current tender arrangements for the Job Network, I am sure the Minister is well apprised and well capable of juggling these two realities.
JOURNALIST: Mr Rudd the timing of this package on the day that the Reserve Bank is expected to cut rates again – was that designed to increase the confidence factor?
RUDD: Our judgement as a Government was that as soon as the new data, and you saw some of it globally through the IMF report the other day, began to become absolutely clear about the next level of challenge that we faced, was to hop to it and do it.
We have been chugging away at this over the summer. And a lot of work has been put in on this and you would have seen a fairly intense level of activity at the relevant committee of the cabinet in the last several weeks as well.
It is ready to roll and that is why we have done it today. At the end of the day, Government action through fiscal policy, accompanied by what we have seen is reductions in interest rates, have one objective, and that is to stimulate the economy.
JOURNALIST: (inaudible) the document mentions global recession which you are referring to now, as intensifying the risk of recession in Australia. Do you think that recession in Australia is inevitable and how confident are you that the budget deficit in the future will peak at $35 billion.
RUDD: On the first part of your question Dennis, this Government will never haul up the white flag on the inevitability of a recession as I notice the Liberal party has. We will throw everything at this. There is no guarantee of success but we will throw everything at this because we believe it is important for confidence and for jobs that we do so. That is the first point.
The second is, in terms of the exit strategy from deficit, I have nothing really to add other than to do doctrinal statement, if you like, I made before in response to the question from over here.
And of course the trigger for that is a return to growth at the point at which, we have returned to above trend growth.
JOURNALIST: Given Treasury’s prognosis and the scale of the economic downturn, do you nonetheless concede we will be in deficit for years and do we now stop calling it temporary?
RUDD: The Government is, if you look at the structure of the Government’s stimulus package, it is both temporary and targeted. It is like this. That is what it is about, and therefore it is designed to provide, as I said before, and ability to partly fill the gap left by this temporary contraction in private demand.
As the general economy and the global economy recovers, our requirement to do that will lessen. The economic statement today is absolutely upfront about the impact on the bottom line, going forward. And absolutely upfront about the fact that we will have to borrow for it, that is the bottom line.
There is no point sort of pretending that black is white and white is black. That is just the truth of it. As I said before, nobody likes being in deficit, neither do I. But the alternative would be to throw another 100,000 Australians into unemployment.
I don’t intend to do that, I intend to everything possible to reduce the burden.
JOURNALIST: (inaudible) what is your message to the banks today about passing on any interest rate rise and also longer term with 300,000 people either not having access to the labour market or losing their jobs? What attitude would you like to see the banks take towards people who become under mortgage stress and face the real possibility of losing their homes (inaudible)
RUDD: First of all, on the question of the banks, there should be a full pass through of any further interest rate reductions as rapidly as possible. Secondly, I would say this to the banks: the banks have benefitted from various things the Government has done for them, not least of which are the two sets of guarantees which are the subject of some debate here, last year: that for depositors and most critically for interbank lending.
Therefore I would say to the banks, given what the Government has done to support the continued strength of our banks and that is important in the financial system, I would strongly urge the banks to take an open hearted and compassionate approach to people and to small businesses who find themselves in strife, for which those people are not to blame.
Can I just add one further thing on the benefit of what we have done for banks. The guarantee which the Government has provided to bank, to interbank lending, has been of enormous consequence in successful capital raisings by the banks offshore, in the last period of time.
Were it not for that intervention which we undertook last year, again amidst considerable controversy, the banks, the ability of the banks to raise the billions of dollars that they have in the last month and a half, would have been fundamentally undermined.
JOURNALIST: Mr Rudd, the prospect of deficits of $35 billion in each of the next two years leaves scope for further discretionary spending in the May budget?
RUDD: Our attitude to discretionary spending as a matter of general principle prior to the point of economic recovery is that it should be offset by savings elsewhere through appropriate reprioritisation. That’s our general approach and it has been. We maintain the same fiscal discipline on that approach as we’ve always embraced. The challenge that we face, given these extraordinary circumstances, is to define and implement a clear cut strategy for exit from deficit at the earliest opportunity. And we intend to do so.
JOURNALIST: Mr Rudd, has the revised economic outlook given the Government any (inaudible) to reconsider what you’re doing in terms of workplace legislation and also the Carbon Pollution Reduction Scheme?
RUDD: You know something, the free market fundamentalists out there who said we should have no regulation of capital markets, basically the ones who also say we should have no effective regulation in labour markets. The one thing that’s been spectacularly proven in recent times, I believe they are wrong on both counts, absolutely wrong on both counts, there’s a clear role for Government regulation and effective regulation in both. That has been demonstrated hands down when it comes to financial markets.
And when it comes to labour markets, particularly at a time when people are concerned about the future of their jobs, let me say, the attitude of families is, they want decent protections in the labour market. They don’t want things stripped away from them, which is what the AWA revolution, the deregulation revolution, the let it rip revolution, of our Liberal predecessors prescribed.
Neoliberals as I’ve said in stuff I’ve written recently, you know, it’s basically an anti-regulation agenda across the board. Don’t want regulation in financial markets, don’t want regulation in labour markets, and if they can possibly get away with it, look at the history, they’d prefer to turn health into a private market as well. First the assault by the front door by trying to get rid of Medicare, then by the back door by defunding the public hospital system.
Given the time of day, and Question Time, I’ve got to zip.
