Mid September 2008 saw a significant change for the Australian economy, with the collapse of the Lehman Brothers triggering the Global Financial Crisis. The Global Financial Crisis was characterised by a tightening in the availability of money from overseas markets and resulting in governments having to intervene to maintain market stability. The Australian economy and its leaders generated considerable discussion about the prospect of a global recession, while most expected the financial crisis would have a major impact on the Australian economy, a factor that was not considered was the immediacy of its effects. The December quarter of 2008, saw business stocks devalue by $3.4 billion, the largest fall on record. In addition, there was a considerable softening in property prices, resulting in many companies/people having too much debt vs. too little wealth. With this, consumer confidence plummeted which in turn deteriorated consumption. Throughout the month of September and into October, the financial crisis spread from the United States to Europe, and all around the global economy, with economies contracting in growth.
In response to the most challenging global economic conditions since the Great Depression, the 2009-2010 Budget and the Economic Stimulus Plan focused on nation building and was crafted to boost employment, create a solid foundation for future growth and place the Australian economy to capitalise on the global recovery.
Stimulus now and investment for the future
A balanced stance on fiscal policy was targeted by the Government in response to the global recession between short and long-term policies. These measures involved bonus payments to low and middle-income Australians to instantaneously add to demand where it was needed the most, and where it would be most effective.
The Government allocated $12.2 billion for targeted bonus payments to aid households and support economic growth. The payments consisted of a Tax Bonus Payment, $900 Single Income Family Bonus, $950 Farmer’s Hardship Payment, $950 Back to School Bonus and a Training and Learning Bonus.
This added to the Government’s initiative to support growth and jobs at the present moment in time, by delivering investments needed to strengthen the economy. The net measures on the 2009-2010 Budget endeavoured to raise the level of Gross Domestic Product (GDP) by three-quarters of a per cent in 2009-10, providing an extra boost to demand when the economy needed it the most.
Supporting Australian small businesses
The 2009-2010 Budget saw the Government recognise the vital contribution made by small businesses to the economy. Small businesses contributes approximately four million private sector jobs in Australia and therefore to support small businesses from feeling the effects of the economic downturn, the Government introduced measures to assist business investment, managing cash flows and improving online capabilities.