SENATE PASSES RUDD'S ECONOMIC RESCUE PACKAGE

UNCLAS CANBERRA 000153

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: PGOV ECON AS
SUBJECT: SENATE PASSES RUDD'S ECONOMIC RESCUE PACKAGE


1. (U) SUMMARY: On February 13, the Senate passed the Rudd
government's $42 billion economic stimulus package, a day
after rejecting it. The key factor was the government upping
the cash for projects favored by independent South Australian
Senator Nick Xenophon, whose no vote was crucial to the
initial defeat of the legislation. Despite altering the
bills to satisfy Xenophon, the fundamentals of the package
have not changed. The Coalition again voted against the
stimulus, arguing that it was too expensive, not properly
targeted and should have included broader tax relief.
Business - desperate for a shot in the arm - generally lined
up behind the Government. Rudd accused the Coalition of
voting against jobs and nation building. END SUMMARY.

THE DAY BEFORE


2. (U) On February 12, the Senate, in a tied vote rejected
the Rudd government's economic stimulus package, with the
Coalition and independent South Australian Senator Nick
Xenophon voting against it. The five Greens Senators and
Family First Senator Steven Fielding, whom obtained
concessions, voted for the legislation, but Xenophon was
upset the government did not go as far as he wanted in
bringing forward funding and providing new money for the
Murray-Darling river system - a big issue in South Australia.
Following the vote, the government turned up the heat on the
Coalition, accusing it of voting against jobs and nation
building. Opposition Leader Malcolm Turnbull claimed the
package imposed enormous debt on future generations, and
would not create jobs. Business groups expressed
disappointment with the Australian Chamber of Commerce and
Industry calling on the Coalition and Xenophon "to reconsider
their decision." The Senate voted to sit the next day to try
and pass the stimulus.

"SHOW ME THE MONEY"


3. (U) The following day, after negotiations with Treasurer
Wayne Swan and Water Minster Penny Wong, Xenophon announced
he would vote for the stimulus after the government agreed to
bring forward $1 billion in funding for the Murray-Darling,
as well as provide $900 million in new money for water
buybacks, re-engineering works and stormwater recycling. The
Greens had earlier obtained $400 million for job creation
projects, environmental initiatives, and help for the
unemployed and low income earners. This was funded by
reducing the tax bonus payments in the package from $950 to
$900 - also a Greens' proposal. Senator Fielding had
negotiated $200 million for a pilot job creation scheme.


4. (SBU) COMMENT: Political commentators, business groups and
the public are each broadly in favor of the stimulus.
However, now that it has passed the Senate, the Rudd
government's "ownership" of the economy increases. Given
that the stimulus drives the Government into debt, and will
only slow the rise in unemployment, Rudd could find himself
on politically uncomfortable ground. Xenophon is a big
winner - he has delivered on one of the biggest political
issues in South Australia, getting virtually everything he
wanted. The Greens again have shown they are willing to
engage constructively with the Rudd government, and have
displayed fiscal responsibility by not increasing the cost of
the legislation. The Coalition has made its strongest stand
since it lost government - on its traditional strength of
economic management.

CLUNE