The government announced its second stimulus plan to spend a further A$42 billion ($27 billion) which is bigger than the first stimulus plan to avoid falling into recession. Main allocation from the stimulus plan is $18.3bn for infrastructure, schools and housing follow by $8.1bn cash payments for low and mid-income earners to be paid in March. This stimulus plan will plunge the annual budget into a A$22.5 billion ($14.2 billion) deficit which is 1.9% of gross domestic product for the fiscal year ending June 2009.
Australia’s central bank cut its benchmark interest rate to 3.25% which the lowest level in 45 years. AUD do not fall further on the rate cut and we believe that effect of reversal in carry trade is largely over by.
The government raised its jobless forecast to 7 percent for the year ending June 2010. Current jobless rate is at 2 year high of 4.5% in December 08.
Average home prices fell for the 3rd consecutive quarter in the 4Q 2008. Incentive schemes and lower borrowing rates have failed to increase the new home sales as new home sales fell 1.7% in December 08.
Sentiment on business confidence has improved in Dec 08 as the index measuring Business confidence climbed 10 points. However consumer confidence slipped in January as pessimists outnumber optimists.
Conference Board leading and Westpac leading indicator down 1% in November as approvals to build new homes declined, share prices slid and exports of rural goods slowed.
Australia's third largest diversified miner OZ Minerals Ltd is forced to sell mines and refinance debt facilities totalling $US560 million ($A815 million).
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