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Economic Slowdown Spread Around the World
HONG KONG — Australia announced another major stimulus plan and its central bank delivered a deep cut in interest rates on Tuesday as the country sought to prop up growth.
The main driver of Australia’s economy — a boom in mining — has fizzled amid the global economic downturn.
The government said it would spend $42 billion Australian dollars, or $26.5 billion, on infrastructure, schools, housing and payments for low-income earners. Last year, Australia announced several measures as the economic slowdown in the United States and Europe began to spread around the world and engulf the economies of the Asia-Pacific region.
The weight of the global recession is now bearing down on the Australian economy. In this case, Australia will act swiftly and decisively to support jobs.
Under the plan, the budget deficit is expected to swell to 22.5 billion Australian dollars ($14.2 billion), or 1.9 percent of the country’s gross domestic product.
“Decisive action is now required to strengthen the Australian economy and in these circumstances, a temporary deficit is the only responsible course of action to support jobs and economic growth,” Wayne Swan, Australia’s treasurer, said in a statement.
The Australian government has estimated that the global recession, which has also caused growth to slow sharply in China, has wiped a total of 115 billion Australian dollars ($72.6 billion) in revenue. China is a major consumer of raw materials.
Governments around the world have announced a flurry of stimulus packages since last September and many, like the Australian government, have since bolstered their original plans as the crisis worsened.
Central banks around the globe have also cut interest rates in many cases to historic lows in a bid to stimulate growth.
By cutting another full percentage point off the cost of borrowing, Australia’s central bank set the key cash rate at 3.25 percent. That takes the total rate cut since September to 4 percentage points.
By BETTINA WASSENER
