Rudd Plans Third Stimulus to Help Australia Economy

By Gemma Daley

April 2 (Bloomberg) -- Prime Minister Kevin Rudd plans a third round of economic stimulus in next month’s budget, the Australian newspaper reported, without saying where it got the information.

The Department of Treasury is preparing the massive burst of spending following figures yesterday showing weaker retail sales, the paper reported, without saying how much the next round of spending would cost. The package may also contain some housing stimulus, it said.

“We’d expect there to be further slowing of growth and a further impact on employment,” Treasurer Wayne Swan said in an interview in Tokyo on March 30 about the May 12 budget. “Unemployment will be higher and also further impact on revenue, which means that revenue downgrades will get higher.”

The economy will probably shrink this year for the first time since 1991, Reserve Bank Deputy Governor Ric Battellino said in Brisbane this week. Retail sales fell in February for the first time in five months, figures released yesterday showed.

The central bank has reduced its benchmark rate to 3.25 percent, the lowest in 45 years, to spur an economy that contracted in the fourth quarter for the first time in eight years. Unemployment rose in February to a four-year high of 5.2 percent.

Home-building approvals increased in February for the first time in eight months, suggesting the low borrowing costs and government grants to first-time home buyers will spur construction.

The government has announced A$88 billion ($61 billion) in cash handouts, infrastructure spending and bond market assistance since September 2008.

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