Australia unveils economic boost with $42 billion stimulus

The Federal Government today unveiled a mini-budget to spend $42 billion on "nation building and jobs" as it revealed there had been an incredible $200 billion turnaround in the budget bottom line over the next four years.

In a fresh bid to spend its way out of recession, the Government announced that five one-off cash bonuses worth up to $950 will be paid to middle- and low-income workers and families, children going back to school, farmers in hardship and people undertaking training.

The package also gives $200,000 to every school for maintenance, spends $890 million on regional roads and black spots, will build 20,000 new homes, boosts rebates for solar hot water and gives tax breaks to small business.

The Treasurer, Wayne Swan, claimed 90,000 jobs would be created by the package over the next two years, but, despite this, the unemployment rate was predicted to jump to 7 per cent by next year.

The budget will be $22.5 billion in deficit for this financial year - a $44 billion turnaround from the $21.7 billion surplus predicted in Mr Swan's first budget last May.

Despite the Prime Minister, Kevin Rudd, saying it would be a "temporary deficit", today's mini-budget reveals the nation's finances will be in the red for at least the next four years with the accumulated deficit of $118 billion (almost identical to the $115 billion that has been wiped from expected tax collections from companies, individuals and the GST).

This compares to $79 billion worth of surpluses predicted for the same period just nine months ago - a $197 billion slump.

Mr Swan said the decline had been caused by the severity and speed of the global recession.

The Government brushed off predictions by the International Monetary Fund and other experts that Australia would record negative growth and slide into recession, and continues to predict positive, albeit flat, growth.