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$42 billion Nation Building and Jobs Package

February 2009

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On 3 February 2009 the Prime Minister Kevin Rudd and the Treasurer Wayne Swan announced the $42 billion Nation Building and Jobs Plan to stimulate the economy in response to deteriorating global economic conditions.  It complements the $10.4 billion Economic Security Strategy announced in October 2008.

The Current Economic Environment

The outlook for the global economy has significantly changed since the Government’s Mid-Year Economic and Fiscal Outlook 2008-09 (MYEFO) in November 2008. The Government has issued the Updated Economic and Fiscal Outlook (February 2009) that forecasts economic growth of 1% of GDP in 2008-09 and 0.75% of GDP in 2009-10. This is in the context of a global recession with the International Monetary Fund (IMF) figures forecasting that advanced economies will collectively experience negative growth (-2%) in 2009. 

The end of the global commodity boom and the fall in China's growth in particular will result in a marked decrease in the Government's tax receipts over the Forward Estimates.  This is mainly the result of declining profits, with company tax receipts over the next four years expected to drop by an estimated $50 billion (17%).  Further, GST receipts to the States over the next four years will also be down by $10 billion (5%) as consumers cut their spending. Rising unemployment (now forecast to rise to 7%) will cut personal income tax revenue by $13 billion (2.4%).  In total, the Government expects that tax receipts over the next four years will be $115 billion lower than was forecast in last year's budget and $75 billion less than what was forecast in MYEFO.
Table 1.2: Main economic parameters(a)(b)

Budget

Consequently, the budget will run at a deficit over the next four years.

Financial Year Deficit
2008-09 -$22.4 billion (1.9% of GDP)
2009-10 -$33.2 billion (2.8% of GDP)
2010-11 -$31.5 billion (2.5% of GDP)
2011-12 -$23.9 billion (1.8% of GDP)
Effects of the Nation Building and Jobs Plan

The Plan delivers a fiscal stimulus package of about 2% of GDP in 2009.  The effect of the Plan on the economy will be such that GDP growth is expected to be around 0.5% higher in 2008-09 and around 0.75% to 1% higher in 2009-10 than it would have been without the Plan. Further, it is expected to support and sustain 90,000 jobs throughout 2009 and 2010.

Chart 2.1: Fiscal stimulus packages delivered by the Australian Government(a)

Details of the Nation Building and Jobs Plan

Schools

$14.7 billion Building the Education Revolution Program
  • Primary Schools for the 21st Century –building or upgrading large scale infrastructure, e.g. Libraries and halls, in every primary school, special school, and K-12s school in Australia.
  • $1 billion Science and Language Centres for 21st Century Secondary Schools –build 500 new science laboratories and language learning centres in schools that can demonstrate need and capacity to complete construction by 30 June 2010.
  • $1.3 billion Renewing Australia’s Schools –refurbish and renew existing infrastructure and build minor infrastructure in all schools, including $200,000 to every Australian school for maintenance and renewal of school buildings.

Energy Efficiency

$3.9 billion Energy Efficient Homes Program
  • $2.7 billion Insulating Australian Households –free installation of ceiling insulation (up to $1600) in 2.7 million Australian homes which will reduce energy bills by approximately $200 for each home.
  • $507 million Solar Hot Water Rebate –increased non-means tested rebates of $1600 to all households that have not already claimed the insulation assistance to install solar and heat pump hot water systems to replace electric storage hot water systems.
  • $612.5 million Low Emissions Plan for Renters –landlords will be able to access an increased rebate of $1000 to install insulation in their rental properties.

Households

$12.7 billion Household Stimulus Package
  •  $8.2 billion Tax Bonus for Working Australians –payment in April 2009 of up to $950 for eligible taxpayers who earn up to $80,000.
  • $950 for those with taxable income up to $80,000
  • $650 for those with taxable income between $80,000 and $90,000
  • $300 for those with taxable income between $90,000 and $100,000
  • $1.4 billion Single Income Family Bonus –additional assistance for families that have one main income earner and may otherwise receive less assistance from the package than dual income families with similar household income.
  • $511.2 million Training and Learning Bonus –a payment of $950 to assist students, those returning to study or training, and some income support for recipients.
  • $2.6 billion Back to School Bonus –a payment of $950 per child to assist low and middle income families eligible for Family Tax Benefit A with school age children. To be paid in the fortnight commencing 11 March 2009.
  • $20.4 million Farmer’s Hardship Bonus of $950 –to be paid to farmers and others receiving Exceptional Circumstances related income support. To be paid in the fortnight commencing 24 March 2009.

Business

$2.7 billion Small Business and General Business Tax Break
  • Additional $2.7 billion temporary tax break of 30 cents in dollar to small and other businesses to boost business investment.
  • Small businesses will be able to access the tax break for assets costing $1000 or more.
  • For all other businesses the asset threshold is $10,000

Infrastructure

$150 million Boom Gates for Rail Crossings
  • $50 million in 2008-09 and $100 million in 2009-10 to accelerate the installation of around 200 boom gates and other active control mechanisms at high risk rail crossings throughout Australia.

 

Additional $90 million investment in the Black Spot Program

  • The Government will invest an additional $30 million in 2008-09 and $60 million in 2009-10 to deliver around 350 additional safety- improving projects to reduce accidents on Australian roads.
  • This complements the Governments announcement in 2008 to double funding for the Black Spot Program to $110 million.

 

$650 million investment in Repairing Regional Roads and Funding for Community Infrastructure

  • $150 million in 2008-09 to help the States and Territories fund additional regional road maintenance projects across Australia.
  • This is conditional upon the States agreement to the $22.3 billion Nation Building Program for 2009-10 to 2013-14.
  • Investment of an additional $500 million over two years commencing immediately to help local councils fund critical community infrastructure projects  through the Regional and Local Community Infrastructure Program –Strategic Projects.

Housing

$6.6 billion Public and Community Housing
  • $252 million Additional Defence Housing Construction Program –funding for Defence Housing Australia to construct 802 extra residential houses for Australian Defence Force Personnel in 2009.
  • The Government will build 20,000 new social housing dwellings, and will fund maintenance to make around 2500 vacant social houses available.

The Nation Building and Jobs Plan will boost household consumption, support private sector investment, provide additional public investment spending and support jobs.  Furthermore, it will benefit schools, the homeless and low and middle income households, cut energy bills in homes and reduce carbon emissions.  In this way it strengthens the future capacity of the economy while at the same time providing an immediate stimulus to the economy, mitigating the effects of the global economic crisis.

Links

Media Release –The $42 billion Nation Building and Jobs Plan
Media Release –Energy Efficient Homes –Ceiling Insulation in 2.7 million Homes
Media Release –Small Business and General Business Tax Break
Media Release –Macroeconomic and Fiscal Outlook
Media Release - Black spots, boom gates, regional roads and community infrastructure
Media Release - 20,000 social and defence homes - nation building investment
Media Release - $950 one-off cash bonus to support jobs
Media Release - Building the Education Revolution –New and upgraded buildings in every Australian school
Updated Economic and Fiscal Outlook February 2009


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