As interest rates are the verge of rising, and Australia's economy shows signs of a good performance, Treasurer Wayne Swan is insisting that government stimulus packages are necessary.
He rejects claims the stimulus plans are causing rates to rise. Mr Swan says the Government wont hesitate to continue spending despite improving conditions.
Mr Swan is expected to reveal an updated budget today that shows the Australian economy has been performing better than most expectations during the global economic crisis.
Reserve Bank Governor Glenn Stevens has shown support for the Rudd Governments stimulus packages and said at a parliamentary committee question session yesterday that he endorses the policy.
“Governor Stevens made it very clear - as did many other people before the inquiry - that there is no direct link between the stimulus measures and possible future interest rate rises. In fact, he pointed out that interest rates in this country are impacted upon by global factors not just decisions of the Reserve Bank.” said Mr Swan
Some banks including the Commonwealth Bank, have already started raising fixed interest rates, ahead of predicted cash rate rises in November. However the treasurer has denied this is due to the government spending.
Mr Swan says the stimulus plans will be required into next year as a way of supporting sectors that are not faring so well, such as private industry demand.
The government announced to stimulus packages during the financial crisis. The first one increased the first home owner grant temporarily and the second one saw many Australian's receive cash handouts. The spending spree was aimed at supporting housing markets and to boost consumer confidence.
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