Curbing stimulus would hurt recovery: Australia

Treasurer Wayne Swan said government stimulus measures totalling more than 70 billion dollars (60 billion US) were the sole reason Australia's economy grew 0.4 percent in the March quarter, while many other economies shrank.

Although Australia has been the only major western nation to avoid a technical recession and while its recent economic indicators have been promising, Swan said support from government stimulus was still needed.

"To withdraw the stimulus now would simply knee-cap the recovery and lead to much higher unemployment," he told reporters.

"The economic stimulus at the moment is vital to supporting business to keep customers coming through the door."

The government handed out 10.4 billion dollars to pensioners and others in December, then earmarked 42 billion in February on measures including cash bonuses to eligible taxpayers and a massive school refit programme.

It followed up in the May budget with 22 billion on infrastructure spending, which is yet to fully feed through into the economy.

Swan said the stimulus was always designed to be temporary but the government would stick to its schedule of ramping up spending between June and September, then scaling it back later in the year.

"Of course stimulus is temporary and is targeted and it is designed to be withdrawn from year's end as the economy recovers," he said.

"Stimulus will be withdrawn as the economic recovery proceeds globally."

The treasurer's comments came ahead of the central Reserve Bank of Australia's monthly monetary policy meeting Tuesday, when it will decide whether to lift interest rates from a 49-year low of 3.0 percent.

The bank has slashed rates from 7.25 percent since last September to cushion the economy from the impact of the downturn but governor Glenn Stevens has indicated they will rise as the economy recovers.

Most economists expect rates to remain on hold in September for a fifth successive month, predicting rises will begin in late 2009 or early 2010.

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