Australia's parliament passed a A$42 billion ($27.4 billion) economic stimulus package today after a last-minute political deal rescued the government's plan to try to avert the country's first recession in two decades.
The vote boosted the Australian dollar on hopes the stimulus payments would reach households in time to stop the economy from contracting as the global slowdown bites deeper.
"Growth is slowing everywhere around the world and countries that can do anything about that are being rewarded," said Jonathan Cavenagh, a currency strategist at Westpac.
The stimulus package, the largest ever in Australia, is worth about 2 per cent of gross domestic product in 2009 and 1.3 per cent in 2010. The Treasury estimates it will lift growth by 0.5 points this financial year (July-June) and 0.75 points in 2009 to 2010.
"Australia cannot resist the international economic forces and we cannot defy the effects of the downturn in our region," Prime Minister Kevin Rudd told parliament after the stimulus measures were endorsed.
The package had been defeated by one vote in the upper house Senate a day earlier, handing Rudd his biggest parliamentary defeat since he won office in late 2007 and prompting fears that cash payments to workers and families would be delayed.
Analysts had worried that any delay in distributing cash handouts worth A$12.7 billion could leave a hole in spending this quarter, and possibly lead to a drop in gross domestic product.
But the package was resurrected and passed after intense negotiations overnight and into today between Treasurer Wayne Swan and independent Senator Nick Xenophon, who had voted against the package yesterday.