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03 Feb 2009 08:35
Australia unveiled a massive stimulus package and Japan announced a share-buying programme to assist banks on Tuesday as part of efforts to buoy their economies in the face of the deepening global downturn.
The moves came as US President Barack Obama pressed Congress not to delay his own nearly $900-billion stimulus plan, intended to kick-start the US economy and reverse a seemingly unending stream of gloomy economic data.
Australia announced a Aus$42-billion ($26-billion) stimulus package, which Prime Minister Kevin Rudd said was aimed at supporting jobs “in the face of the unfolding national and international economic emergency”.
The plan was made public as the government slashed its growth forecast by half for the current financial year and upped the estimate of job losses in Australia, whose decade-long boom is grinding to a halt amid the slowdown.
“No country will escape the impacts of the global recession, which is causing falls in growth, job losses and budget deficits right across the world,” Australian Treasurer Wayne Swan said in a statement.
The government said the budget would plunge Aus$22,5-billion into deficit—a sharp reversal from the forecast less than a year ago of a surplus of Aus$21,7-billion.
Australia’s central bank slashed interest rates by one percentage point to a 45-year low of 3,25% in the latest in a series of aggressive cuts sparked by the global crisis.
Japan’s central bank meanwhile said it would spend up to one trillion yen ($11,2-billion) to buy shares held by commercial banks as part of efforts to ease the credit crunch in Asia’s biggest economy.
“Global financial and capital markets remain under severe strain,” the Bank of Japan said. It said it would start buying shares held by commercial banks through April 2010.
The crisis, first sparked by subprime loans in the United States to borrowers with spotty credit histories, has led to a credit crunch, with many banks unwilling or unable to engage in widescale lending.
That has worsened conditions during the current global slowdown, and new US President Obama has repeatedly said the United States is facing its worst financial crisis since the Great Depression.
But there has been heated debate about the ultimate effectiveness of government stimulus measures, and Republicans in the US Senate have vowed a tough fight this week for Obama’s stimulus plan.
They say the Bill contains insufficient tax cuts, which they argue are needed to stimulate public demand, and fault much of its vast infrastructure spending, support for social programs and funding for state initiatives.
But Obama, facing the first major legislative test of his fledgling presidency, said the time for action had come.
“What we can’t do is let very modest differences get in the way of the overall package moving forward quickly,” he said.
But Senate Republican minority leader Mitch McConnell said major changes were needed to the version passed by the House last week.
“We need to make sure that we’re not borrowing money to spend on projects that are not going to stimulate the economy,” he said.
The battle on Capitol Hill came amid more unhappy news about the health of the US economy.
The Commerce Department said US consumer spending fell 1% in December from the previous month, while incomes dropped 0,2%.
Macy’s, a major US retailer, announced 7 000 job cuts as it streamlined operations to cope with a deepening recession that has dampened consumer spending.
Governments across Europe meanwhile were looking at their own measures to turn around their flagging economies.
Germany said it was considering nationalising some banks, while France unveiled new measures as part of a €26-billion ($33-billion) stimulus plan.
But the mood remained downbeat.
“I’d be extremely astonished if we have positive growth in 2009,” French Finance Minister Christine Lagarde said.
“Let’s be realistic.”
The slowdown has hurt economies around the globe.
But the managing director of the International Monetary Fund, Dominique Strauss-Kahn, said the outlook for Asian economies could turn around next year.
“Once the world economy regains its footing a rapid recovery is possible,” he said, predicting Asian economic growth of more than 5% in 2010, almost twice the pace expected in 2009. - AFP
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