Australia Unveils Stimulus Package

123jump.com Staff
14 Oct, 2008
New York City

Australia unveiled A$10.4 billion stimulus package. The latest move comes after the government guarantee to insurance all bank deposits and lower interest rate by 1%. The fiscal and monetary measures are expected to sustain domestic economy in the face of weak global market conditions.

[R]3:00AM New York, 7:00PM Sydney - Australia unveils A$10.4 billion stimulus package.[/R]

Australian market averages surge on a rise in commodity stocks on a speculation that the global economies may avoid a recession.

Market Sentiment

In Sydney trading ASX 200 index rose 3.7% or 154.5 to 4,335.20.

Of the ASX 200 index stocks, 152 rose, 41 declined, and 7 were unchanged. Fortescue Metals led advancers in the index shares with a rise of 54.96%.

Australia Unveils A$10.4 billion Stimulus Package

The Australian government today reported that it is introducing a A$10.4 billion stimulus package to insulate the mainstream economy and households from the adverse effects of the current turmoil on the financial markets.

Funding for the ambitious project will be from the budget surplus, which is expected to top A$21.7 billion for fiscal 2008-2009 according to the May budget estimate.

The measures are in addition to the three-year guarantee on all bank deposits that was announced by Prime Minister Kevin Rudd yesterday and last week''s 1% interest rate cut.

To stimulate consumer spending, especially in the pre-Christmas period, single pensioners will be entitled to A$1,400 while retired couple will receive A$2,100.

In addition, low income and middle income families will be given A$1000 for each child under their guidance.

All the payments will be made after December 8.

Also under the package, the grant for first homebuyers will be increased to A$14,000, while the grant for first homebuyers who purchase a newly constructed house will be doubled to A$21,000.

According to Rudd the measures were primed to cushion both the economy and households in the wake of ""the risk of a deep and prolonged global economic slowdown"".

U.S. Invests $250 billion in Nine Banks

Secretary Henry Paulson is expected to announce a plan to invest $250 billion immediately in nine largest banks and financial companies but did not name them. The investment will be exchanged for preferred stocks, curtail executive pay and also take warrants that will convert to common stocks.

The move is designed to restore confidence in the banking system and not force the government to choose one over the other. Treasury also expects to invest additional $250 billion in another 1,000 banks.

Sources in U.S. Treasury and FDIC confirm that nine institutions that have agreed to take capital after pressured by Treasury Secretary include Bank of America, Merrill Lynch, Morgan Stanley, JP Morgan Chase, Bank of New York, State Street Corp, Wells Fargo, Goldman Sachs and Citigroup.

Gainers & Losers

Fortescue Metals led advancers in the ASX 200 stocks with a rise of 54.96% followed by rises in Babcock & Brown of 39.30%, in Gloucester Coal of 27.96%, in Sundance Resources of 26.09%, and Nexus Energy of 25.30%.

Commodity stock increased after metal and oil prices soared. Oz Minerals advanced 16.52%, Linc Energy gained 15.62%, and Felix Resources advanced 14.46%.

Platunum Australia led decliners in the ASX 200 index shares with a fall of 11.36% followed by losses in Sino Gold of Mining of 10.35%, in Macquarie of 8.33%, in CFS Retail Property of 6.88% and Westfield Group of 6.30%.

Suncorp Abandons Selling Banking and Wealth Management Assets

Suncorp Metway reported on its Web site today that the company has decided to forgo selling its banking and wealth management units after the Australian government decided to guarantee all deposits.

The company however said it is willing to re-engage the parties whose proposals are realistic and offer fair value to shareholders.