Prime Minister Kevin Rudd has tried to reassure all Australians that the Government is doing everything it possibly can to keep us out of a recession.
Yesterday the Government unveiled a $42 billion stimulus package including $28.8 billion for our aging schools, housing energy efficiency, infrastructure and support for small businesses.
The Government also promised another $12.7 billion as a one-off bonus payment of up to $950 each for low and middle-income earners.
In his address to the nation, Mr. Rudd warned Australians that the global financial crisis had worsened quicker than expected in the past three months. He further stated that he could do nothing to impact the effect of the global recession on Australian jobs, but with government action we could reduce it.
Mr. Rudd stated that he had the utmost confidence that the underlying strength of the Australian economy and people would see our nation through these tough times.
Economists said that the second stimulus package should boost consumer spending and create construction jobs in these tough times.
Michael Workman senior economist of the Commonwealth Bank of Australia said the payments to households would help boost consumption in the short term.
The current unemployment rate is 4.5 per cent but it is expected to rise to 7 per cent in 2009/10. Mr. Workman said that the outlook was gloomy but quite realistic.
Mr. Workman further added that he felt that the construction and mining sector workers that had been hit by the economic downturn would benefit from the infrastructure programs.
The Federal Budget is expected to sink into a $22.5 billion deficit in the 2008/09 financial year, a massive deterioration from the projected $5.4 billion surplus, and deepening into deficits of over $30 billion in the following two years.
The budget deficit as a proportion of gross domestic product (GDP) will be 1.9 per cent, the highest level since 1995/96 when Australia's budget deficit constituted 2.1 per cent of GDP.
Gross domestic product (GDP) is now expected to grow by just 1.0 per cent in the 2008/09 and by only 0.75 per cent the following year, compared with forecasts of 2.0 per cent for 2008/09 and 2.25 per cent for 2009/10 made in November.