Australia Court Rejects Challenge to Stimulus Plan

Australia's A$42 billion (US$29 billion) recession-fighting stimulus package survived a court challenge on Friday, enabling the government to rush out cash payments promised to millions of

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The center-left government planned to begin paying A$7.7 billion worth of bonus payments to 8.7 million taxpayers this month as part of a stimulus announced in February in a bid to help the weakening economy weather global recession.

Legal academic Bryan Pape challenged the payments in the High Court, arguing they contravened Australia's constitution and exceeded Canberra's taxation powers. The payments are to be handed out by the national tax office through a special tax law.

"The Bonus Act is a valid law of the Commonwealth," Chief Justice Robert French told a packed court.

A tax office spokeswoman said "minor slippage" caused by the challenge to the April 2 deadline for printing cheques would not delay stimulus payments, aimed at keeping Australians spending.

Pape was once affiliated with an opposition party that is against the stimulus package, but he denied his legal move was politically motivated. He said the challenge was not aimed at the idea of an economic stimulus, but at upholding the constitution.

Commonwealth Solicitor-General Stephen Gageler, arguing for the government, said the payments were legal and that the national government had the power to appropriate money and spend it for any purpose determined by the parliament.

The High Court's full seven-member bench was told that a narrow legal definition of the parliament's power to make funding appropriations, and the executive's power to spend it, would have a "chilling" effect on government, and would be absurd.

"The stimulus is designed as a measure to safeguard the national domestic economy from the adverse practical consequences of a global economic crisis," Gageler said.

Prime Minister Kevin Rudd's Labor government plans to pay A$900 to people whose taxable income is up to A$80,000, A$600 to taxpayers with income between A$80,000 and A$90,000, and A$250 to people whose income was between A$90,000 and A$100,000.

Australia moved to the brink of recession last quarter with the first economic contraction in eight years. The government hopes its stimulus of cash handouts and infrastructure spending will help shield the economy.

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The jobless rate spiked to 5.2 percent in February, and the government expects unemployment to reach 7 percent by mid-2010.