Australia Government Passes $27.4 Billion Stimulus

Australian parliament passed a A$42 billion ($27.4 billion) economic stimulus package on Friday after a last-minute political deal rescued the government's plan to head off the country's first
recession in two decades.

CNBC.com

The move came after the government promised to spend almost A$1 billion to help fix the country's ailing rivers, in a deal hammered out with key independent senator Nick Xenophon, who had voted with the opposition to defeat the package on Thursday.

Friday's new vote, which backed the amended package 30 votes to 28, boosted the Australian dollar on hopes the stimulus payments would reach households in time to avert recession in an economy badly hit by the global slowdown.

"I'm not sure whether this package is going to save this country from recession," Xenophon told parliament. "I'm pleased to say I believe we have been able to reach a compromise, which
while not giving everybody what they want, may give everyone what they need."

The deal is a major victory for Prime Minister Kevin Rudd, a day after he suffered his biggest parliamentary defeat since he won office in late 2007.

Treasurer Wayne Swan led negotiations with Xenophon on Thursday night and Friday morning, and said the government was willing to make a deal in the national interest.

"We are prepared to act in the national interest. That's what governs the fiscal stimulus package in the first place," he told Australia radio.

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Analysts had worried that any delay in distributing cash handouts worth A$12.7 billion could leave a hole in spending this quarter, and possibly lead to a drop in gross domestic product (GDP).

Late last year, the government announced a A$10 billion stimulus package which possibly helped Australia skirt a recession. But six of its major trading partners are in recession and that is threatening to leave hundred of Australians jobless.

Under the latest stimulus, the government will give cash payments to millions of Australian workers and families, with the first payments due in March.

Copyright 2009 Reuters. Click for restrictions.