Tanner says stimulatory spending under consideration

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Finance Minister Lindsay TannerThe federal government is actively considering spending part of its $21.6 billion budget surplus to stimulate the economy, Finance Minister Lindsay Tanner says.

But he won’t say what is under consideration or whether it will be done ahead of the budget in May next year.

Nor will he say whether the government intends running a budget deficit.

Mr Tanner said unusual and difficult circumstances and events abroad would impact on Australia, and the government was considering how best to use the surplus to sustain positive growth and protect jobs.

“This question is under active consideration right now. It is one of the levers available to the government,” he told ABC Radio today.

“If you have serious downward pressure on economic activity, as we are now seeing as a result of the international circumstances, we will have available to us the option of increasing government spending very quickly.

“There are a whole variety of possible things that can be done and clearly they are part of the consideration.”

Changes to the tax system or direct payments to people through welfare, pensions, unemployment benefits or family payments, were two traditional areas available to the government, he said.

“They are the kind of things that get money flowing but also direct spending on economic activity.

“Governments are major players in the economy directly. Governments build things.”

One option was to bring forward spending ahead of the budget.

Cuts in interest rates and the fall in the value of the dollar would also have a very significant stimulatory effect, although that might not be felt for some time, Mr Tanner said.

Prime Minister Kevin Rudd yesterday announced a three-point plan to maintain confidence in Australia’s financial institutions, including a government guarantee of all deposits for three years – worth up to $700 billion – and a guarantee of funds lent to Australian banks, again about $700 billion.

These measures were temporary and it was highly unlikely any of these guarantees would ever be called on as there was nothing wrong with Australian institutions, Mr Tanner said.

AAP mb/rl/nf/it/bwl

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