A Breakdown of the Federal Governments $42bn stimulus package

5 February 2009

Over recent days the federal government has announced that it will launch its $42 billion stimulus package for the national economy to soften the effects of the approaching recession. This is the second stimulus from the Labor government and it maintains a strong focus on schools, housing, energy efficiency in homes, community infrastructure and roads, and small business support.

The stimulus packaged was designed to balance across delivered payments to families, investment in schools and important infrastructure with the government stating that for every $1 spent providing immediate stimulus to the economy it has invested more than $2 on long term investments that will generate future economic growth.

Prime Minister Kevin Rudd said the package is designed to protect 90,000 jobs over the next two years.

The $42 billion stimulus package has been divided into some of the following:

$2.7 billion in business tax breaks

Businesses with a turnover of $2 million or less will now be able to claim under a temporary tax break an additional 30 per cent tax deduction for eligible assets costing $1000 or more acquired from December 13 2008 to June 30 2009, and installed by June 30 2010.

The $2.7 billion allocated for business tax breaks is designed to create a strong pressure for future investments, economic activity and to further support jobs.

$14.7 billion for the schools Building the Education Revolution package

Receiving one of the larger allocation of the stimulus package, the funds will be used through the Building the Education Revolution package. Large scale school infrastructures such as halls and libraries will either be constructed or upgraded in every primary and high school.

The package will see the construction of approximately 500 language learning centres and science laboratories for any school that satisfies the criteria for needed upgraded facilities.

Also under the education package, every school across Australia will receive up to $200,000 for maintenance.

$6.4 billion in housing package

The $6.4 billion housing package will be divided up across several major projects, each with a various long term goals and benefits.

In an attempt to curb future carbon emissions on a household scale, 2.7 million homes will be receiving ceiling insulation which is expected to make a household more energy efficient. The long term effects of this move are expected to cut emissions and household costs.

For those homeowners who do not fall into the 2.7 million homes category will also be able to take advantage of the free product and installation with the costs to be capped at $1,600 per every residence, whereas renters will be capped at $1000.

Also within the stimulus package Australian Defence Force personnel will receive 20,000 new social housing dwellings and 802 new houses, to be constructed over the coming years.

The $6.4 billion housing package is expected to create over 35,000 jobs in the building and related industries.

$12.7 billion in individual payments

Individual payments for those fitting the set criteria means that many Australians will be receiving up to $950 in a total lump sum payment, an overall combined value of $12.7 billion.

Furthermore, there will be a $950 Back to School bonus allocated towards low and middle income earners in addition to $950 Training and Learning bonus for students and those studying outside the workforce.

Families with one income, drought affected farmers and farm dependant small business owners will also receive a $950 payment.

The one-off payments are expected to provide financial support to over 8.7 million Australians.

Treasurer Wayne Swan stated that "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."

It is expected that the individual payments will financially assist many individuals while stimulating the economy through encouraged consumer activity in the short term until the nation building initiatives have an impact.

$890 million in community infrastructure upgrades

$890 million will be allocated towards to improving community infrastructure and safety on the country's roads.

Mr. Wayne stated that the future treasury prognosis without the stimulus would likely lead to generating negative growth, leaving the government with the challenge of providing measures within the stimulus to promote a greater prospect of generating positive growth in that period.

He further explained that that was the principle reasoning behind the magnitude of the stimulus package, with the intent of maximizing investment flow over the approaching years.

The package passed through parliament's lower house last night in an epic 15 hour debate, with the Senate's finance and public administration committee due to examines the package.

In order for the stimulus package to be approved and put into effect it would require the government's borrowing limited be increased from $75 billion to $200 billion to service debt. For this to happen, the federal government would need all seven crossbench senators to approve the upper house against coalition opposition.

Those within the federal government have defended this increase motion stating that even at $200 billion in debt, this is still lower than many other countries as a percentage of gross domestic product.

In contrast, US President Barack Obama has announced a US$819 billion economic stimulus package.

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