Big day for monetary and fiscal policy – 'all hands are on deck'

"The package targets consumer spending, which is absolutely critical to our near-term economic prospects, and boosts capital expenditure - looming as one of the real casualties of the downturn. 

"In particular, business welcomes the $2.7 billion investment incentive. This measure will help sustain business investment and support jobs and productivity improvements. 

"The big boost to housing and education infrastructure spending is particularly welcomed. The emphasis on new capital works together with comprehensive maintenance programmes will deliver lasting benefits and again, much needed support to jobs and business activity. 

"The bonus payments will provide an immediate stimulus to household and consumer spending. This will bolster retail businesses and flow up production chains through manufacturing and services. 

"The training and learning bonus is a welcome initiative. However, more will need to be done to support education and training, along the lines outlined in Ai Group's pre-budget submission and as foreshadowed by the government,

"Combined with the announcement of a one per cent drop in the official cash rate today's package should help shore-up household confidence and expenditure.

"The interest rate cut will be welcomed by home owners and buyers, consumers and businesses. It is imperative that banks fully pass on the interest rate cut to all classes of borrowers.

"Updated economic data confirms our view that 2009 is going to be a difficult and unpredictable year. The downgrade of forecasts comes on the back of ongoing bad news about the economy, suggesting that the outlook is deteriorating.

"The exit strategy embodied in the new fiscal rules outlined by the Prime Minister is prudent. However, we suspect there is some way to go in managing the downturn and the critical imperative is to decisively deal with the problem at hand. The May Budget provides an opportunity for further action.

"In putting this package in place the government needs to be mindful of not putting further pressure on business in other policy areas. Proposed changes in the areas of workplace relations and climate change have the capacity to be costly for business at a difficult time," Ridout said.