Australia Won’t ‘Hesitate’ to Boost Economy, Treasurer Says

Jan. 24 (Bloomberg) -- Australia’s government won’t hesitate to stimulate the economy further should the need arise amid the global recession, Treasurer Wayne Swan said.

Swan, speaking to the New York investment community, said the government could add to some A$45 billion ($29 billion) in stimulus already announced should economic conditions worsen.

“We will not hesitate to take whatever further action is necessary to support growth and jobs,” Swan, 54, said in speech notes received via e-mail. “Major financial institutions, some of which have withstood world wars and the Great Depression, have either collapsed or been bailed out.”

Since October, Australia’s government has announced almost A$45 billion in aid for families, pensioners, bond markets, home buyers, and extra spending on schools and roads. Reserve Bank of Australia Governor Glenn Stevens, meanwhile, has embarked on the biggest round of interest-rate cuts in almost two decades.

Australia’s “strong balance sheet” and positive net worth position have given the government and central bank “more room” than most countries to adjust settings, Swan said.

The government’s recent spending boost came after credit markets froze following the bankruptcy of Lehman Brothers Holdings Inc. on Sept. 15, prompting governments and central banks around the world to bail out financial institutions and try to revive growth.

Trading Partners

Australia’s biggest trading partners of China and Japan are suffering as the global recession pummels exports. China, which accounts for a fifth of global growth, expanded at its weakest pace in seven years in the fourth quarter; Japan’s first recession since 2001 is deepening.

Australia’s economy expanded at its weakest pace in eight years in the third quarter. The unemployment rate rose to 4.5 percent in December, the highest in almost two years, as mining companies, airlines, and automakers fired full-time workers, adding to signs the economy faces its first recession since 1991.

The nation’s economy is not immune to the global financial crisis, but is nonetheless well-placed to weather it, Swan said.

“The appreciation of the Australian dollar is helping provide a substantial stimulus to the domestic economy,” Swan said. “Australia’s housing market also has positive characteristics.”

The government, in its latest forecast, said the economy will grow 2 percent in the year ending June 30, 2009. The central bank in November lowered its 2008 economic growth forecast to 1.5 percent from 2 percent.