Rudd to Add Infrastructure Plan to Australian Economic Stimulus

By Gemma Daley

Dec. 12 (Bloomberg) -- Australian Prime Minister Kevin Rudd will make a “significant” statement on infrastructure, adding to A$26 billion ($17.5 billion) in stimulus plans to ease concerns the nation may slip into a recession as Chinese growth sags.

Rudd, 51, earlier today announced a A$440 million tax break for small businesses, which employ 1.7 million people. He’s stepping up efforts to bolster the economy two days after Rio Tinto Group said it will cut 14,000 jobs and sell assets as commodity prices tumble and China’s economy slows.

“This statement today will be a significant statement on infrastructure,’ Rudd told Melbourne Radio 3AW. “The objective is to invest money into the economy, to do that through infrastructure we need, bringing forward as much infrastructure investment as we can.”

The government since mid-October has announced relief for families, home buyers, pensioners, schools and hospitals. The A$1 trillion economy grew at its weakest pace in eight years in the third quarter as consumer spending stalled. China is Australia’s biggest trading partner, with two-way trade worth A$57.9 billion in fiscal 2008, including A$12.42 billion of Australian iron ore exports, government figures show.

The threat of Australia’s first recession in 17 years has prompted Reserve Bank of Australia Governor Glenn Stevens to embark on the most aggressive round of interest-rate reductions since a recession in 1991. Consumers and businesses are reeling from a 43 percent slump in the benchmark Australian S&P/ASX 200 stock index and the biggest decline in home prices since 1978.

“2009 is going to be very tough,” Rudd said.

China’s economy grew 9 percent in the third quarter, the least in five years. The World Bank is forecasting China’s economy will expand by 7.5 percent next year, which would be the slowest pace since 1990.

China is Australia’s biggest trading partner, with two-way trade worth A$57.9 billion in 2007-08, including A$12.42 billion of Australian iron ore exports, government figures show.

To contact the reporter on this story: Gemma Daley in Canberra at gdaley@bloomberg.net