The incoming Australian government is set to unveil a budget stimulus package that would boost infrastructure spending and stave off a post-mining boom slowdown that could push up unemployment.
Treasury briefings after the election with the new government emphasized the risks to economic growth and suggested the growing gap in capital investment following the peak of the resources boom is more dramatic than expected.
Treasurer Joe Hockey has said that the new Coalition government would start road building projects in response to the expected rise in the country's jobless rate. "We are going to have to spend more money because the gap in capital investment with the end of the mining boom is far more dramatic than expected," said Hockey.
"Our goal is to immediately stimulate economic growth, create jobs and ensure that Australians receive the productivity benefits of better infrastructure sooner rather than later," he added.
Officials said that in order to lift up the financial markets and help build business and consumer confidence, a growth strategy must be in place that would address the expected economic slowdown.
The Coalition opened the way for a shift in spending late in the election campaign when it said it was going to bring forward some infrastructure projects in the big cities through 4.5 billion AU dollars (4.4 billion US dollars) cuts to the foreign aid budget.
But the economic outlook, which was highlighted last week by a rise in the unemployment rate to 5.8 percent, has led the new government to consider an extra injection of funds.
Prime Minister Tony Abbott and Hockey have held extensive talks with state premiers and treasurers in the past few days, building on previous conversations before the election, aimed at securing state cooperation to get projects started.
While there are impediments to getting some projects moving more quickly, the Coalition believes it will be able to get Sydney 's WestConnex motorway project off the ground and has already committed 250 million AU dollars (234 million US dollars) of federal money by June next year, an amount that is likely to increase further.
New South Wales government is expected within weeks to release the business case for the WestConnex motorway, billed as the biggest motorway project in Australian history.
Victorian Premier Denis Napthine said he has been discussing with federal officials on how to bring forward the next stage of the East West Link through Melbourne's inner northern and eastern suburbs.
In areas where there are obstacles to its projects, sources said the federal government is prepared to consider interim work like road widening to ensure that capital spending across the economy would not slump even further.
During the campaign, Abbott said he wanted to be known as "an infrastructure prime minister" who was going to put "cranes in the skies" and listed a range of city infrastructure projects he wanted to see built, some of which are already under way.
In addition to WestConnex and the East West Link, he also called for the upgrading of the Bruce Highway in Queensland, the Gateway Motorway extension in Brisbane, and the Swan bypass upgrade in Western Australia. The economic assessment of Treasury reflects that of private sector economists: business has plenty of capacity to spend with balance sheets in good shape, and consumers have money to spend, but there is a shift in the economy as the massive investment stage of the resources boom winds down.
Hockey is believed to have grown increasingly concerned about the economic outlook this year and became cautious about the timetables the Coalition was advocating for a return to surplus, and moved to give the Coalition maximum flexibility after the election.
The goal is now to be able to offset spending rather than improve the budget bottom line.
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