The Rudd Government is considering bringing promised tax cuts forward to counter the worsening global economy.
The Australian has reported that treasurer Wayne Swan said that the Government was determined to do all it could to strengthen the economy in the face of the international crisis.
He further went on to say that Australian families, businesses and the Rudd Government were all in this together and that we were ready to take more decisive action should the international situation deteriorate further.
As previously promised the Government is in the process of spending $10.4 billion, with payments to pensioners, families and carers, and increasing the first-home buyers grant.
Since the first stimulus package was unveiled in October both the domestic and international outlooks have deteriorated prompting the International Monetary Fund to place further pressure on the Government to do more.
The unemployment rate in the US has reached a 16-year high of 7.2 per cent with 550,000 people losing their jobs last month indicating that the recession in the United States is far worse than predicted.
The ANZ's monthly survey of job advertisements has shown a 9.7 per cent fall in December alone, with the number of jobs on offer falling by 27.2 per cent since July indicating that the employment outlook in Australia is also getting worse.
Warren Hogan ANZ's head of Australian economics said the pace of decline was consistent with a recession over the next nine months and suggested rising unemployment that would last for several years. He further went on to say that the collapse of job advertisements meant that the Government's budget position was weakening faster than it had forecast in its budget update in November last year, which tipped the unemployment rate to rise to 5 per cent.
Even with the $3.4 billion tax cut already locked in from July 1 it is possible that the Government may bring an additional $4.5 billion tax cuts presently planned for the middle of next year forward.
Tony Meer Deutsche Banks chief economist expects the budget deficit to be in the region of $10 to $12billion, depending on the size of additional spending.
He expects the tax cuts legislated for this year, in addition to those that were delivered last July, would pump about $10 billion into the economy in 2009-10.
He said it was possible this would be raised by another $5 billion or so, possibly by bringing forward the 2010-11 cuts, and that by 2010-11 the budget deficit could be blown out to about $35 billion.