Hawker Britton Occasional Papers and Media

$4.7 Billion Nation Building Package

December 2008

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The Rudd Government today (12 December) announced a $4.7 billion nation building package to further strengthen the Australian economy in the face of the current global financial crisis.  The package aims to assist Australian businesses through infrastructure investments in road, rail, and education, as well as significant tax changes. The Government anticipates that the largest economic effects of this package will be in 2009–10.  The Government anticipates the package will help increase GDP by ¼ to ½ of a percent, and assist in creating up to 32,000 jobs.

Today’s package follows from earlier announcements, including the $10.4 billion Economic Security Strategy, the $6.2 billion New Car Plan, the $300 million local infrastructure funding boost, and the $15.1 billion COAG package.

The Government has indicated it will make further announcements about nation building projects, funded from the Building Australia Fund, and subject to the Infrastructure Australia priority list, early next year.

The full text of today’s announcement can be accessed here.

Key infrastructure elements:

Tax changes:

$1.2 BILLION INVESTMENT IN RAIL INFRASTRUCTURE

Over the next two years, the Rudd Government has announced it will invest $1.2 billion into the Australian Rail Track Corporation (ARTC) in 17 projects to improve the reliability and competitiveness of the nation’s rail freight network.

$580 million of today’s announcement will be used to expand capacity along the rail corridors connecting Hunter Valley coal mines to the Port of Newcastle.  This $1 billion project will more than double the amount of coal being transported to export markets from 97 to 200 million tonnes a year.

Other Rail projects funded today include:

$711 MILLION INVESTMENT TO BUILD BETTER ROADS

The Rudd Government will bring forward $711 million in roads spending for this financial year to accelerate the commencement of 14 road projects.

Today’s package will also more than double  investment this financial year in the Government’s Black Spots program from $50 million to $110 million.

Other road construction projects bought forward by this package include:

The Government will also set aside $195 million for investment in agricultural and social infrastructure to develop irrigated agricultural land around Kununurra Western Australia following assessment of the projects by the State and Federal Governments.

$1.6 BILLION TO BUILD BETTER UNIVERSITIES AND TAFES

The Government will fast track the spending of $580 million into 11 projects focussed on strengthening research facilities at Australian universities. These will be funded through the Education Investment Fund.

Projects include:

The Government will also fund a one-off $500 million investment to target capital expenditure towards the development of teaching and learning spaces in Australia’s universities. This funding will be delivered through the Teaching and Learning Capital Fund for Higher Education.

Additionally, the package also delivers a $500 million injection into public skills and training infrastructure through The Teaching and Learning Capital Fund for Vocational Education and Training.

TWO SIGNIFICANT TAX CHANGES

Investment Allowance:

The Government will invest $1.6 billion in a 10 per cent temporary investment allowance – provided as an additional tax deduction – which will encourage capital investment by Australian businesses. The allowance will be equal to 10 per cent of the cost of an eligible asset.

The investment allowance will be available for new assets which are acquired, held under a contract or constructed after today and before 30 June 2009. These assets need to be installed and ready for use by June 2010 in order for the investment allowance to be claimed.

Pay As You Go Instalments Reduction Measure:

The package will cut the next quarterly pay-as-you-go (PAYG) instalment by 20 per cent, anticipated to effect 1.3 million small businesses. This reduction in the February 2009 instalment will provide immediate and much-needed cash flow relief to small businesses and aims to encourage small business confidence.

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