The Plan
The Challenge
(as at 15 September 2009)
In 2009 Australians are facing a vastly different
global economic environment to the one they knew
even just a year ago. The world has been caught in
the worst economic crisis since the Second World
War, a crisis that has delivered recessions in every
major advanced economy.
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The International Monetary Fund (IMF) is currently
forecasting advanced economies to contract by 3.8 per cent
collectively in 2009. Growth has slowed dramatically in key
emerging economies, the recent pickup in some countries growth
notwithstanding.
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All these factors have caused a rapid unwinding of the mining
boom in Australia, with major consequences for Australian
revenues, growth and jobs. In the June quarter alone, we
witnessed a fall of around $11 billion in export revenue. The
terms of trade have fallen by 16.8 per cent as commodity prices
have fallen.
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The global recession pushed the Budget into deficit, even
before policy action was taken. Even after the revenue lost and
economic stimulus measures, the Australian Government budget
still remains amongst the strongest in the world.
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The global recession has affected our everyday lives. In
households across Australia, decisions are being made around the
kitchen table about how to make the family budget go further.
Decisive policy action has been required to meet the challenges
of strengthening the Australian economy, protecting Australian
families and supporting jobs.
The Solution
A temporary deficit has been the only responsible
course of action to support jobs and economic
growth. To this end, the Government is delivering a
$42 billion Nation Building — Economic Stimulus Plan
to support jobs and invest in future long term
economic growth.
The IMF has endorsed this approach to help kick start the
Australian economy, advising that the budget has to go into
deficit in these circumstances.
The initiatives in the Nation Building - Economic Stimulus
Plan provided a boost to the economy of around ½ per cent of GDP
in 2008-09 with an impact of around ¾ per cent to 1 per cent of
GDP expected in 2009-10.
The Government’s stimulus strategy has been carefully
designed to taper off as the economy strengthens. The peak
impact occurred in the June quarter and while stimulus will
continue to support the economy, its impact will be diminishing
over coming quarters in line with the expected pick up in
private sector activity.