Govt urged to keep boosting economy

SYDNEY - The Treasury has advised the federal Government not to pull back on unspent money from Labor's A$42 billion ($51 billion) economic stimulus package.

The advice, prepared a week ago, said the stimulus package might prove "more effective than first thought", Fairfax newspapers reported.

It also stated that unemployment was unlikely to hit the 8.5 per cent figure forecast in the Budget in May.

"It would be wrong to conclude that the success of the stimulus to date is an argument for winding back the stimulus still in the pipeline," the Treasury advice states.

"Withdrawing the stimulus more quickly would risk stalling the economy and causing a steeper rise in the the unemployment rate."

Treasurer Wayne Swan told the Australian newspaper the Government was committed to its spending plans, which he credited with helping the nation avoid recession.

"The road to economic recovery will be long and very bumpy as the global recession plays out, which is why you can rest assured the Government is 100 per cent determined to keep implementing our stimulus to support Australian businesses and jobs," Swan said. However, he did say the Government would consider "recalibrating" the stimulus programme but without reducing its overall size.

"We will continue to monitor the stimulus package to make sure it is providing support to the economy - when it is needed and where it is needed," Swan told the Australian.

While the country is expected to avoid recession, home owners are unlikely to be celebrating as signs of recovery put pressure on interest rates ahead of a monthly Reserve Bank of Australia board meeting this week.

The package is also expected to come under review tomorrow, when national accounts data for the June quarter is released.

- AAP