By Gemma Daley Dec. 12 (Bloomberg) -- Australian Prime Minister Kevin Rudd said the government will spend an extra A$4.7 billion ($3.2 billion) on infrastructure in a bid to prevent the economy from sliding into a recession as the global economy stalls. Rudd, 51, said the money would be spent on rail, road and education, adding between 0.25 percent and 0.5 percent to economic growth in 2009-10. He’s stepping up efforts to bolster the economy two days after Rio Tinto Group said it will cut 14,000 jobs globally and sell assets as commodity prices tumble. “This is a longer-term package to help the economy through what will be some tough years ahead,” Michael Blythe, chief economist at Commonwealth Bank of Australia, said in Sydney. “A huge policy effort is underway around the world to jump start the real economy.” Today’s package adds to A$26 billion in stimulus the government has announced since mid-October for families, home buyers, pensioners, schools and hospitals. The A$1 trillion economy grew at its weakest pace in eight years in the third quarter as consumer spending stalled. Governments around the world are switching from grants to consumers to funding highways, rail and infrastructure projects as they try to revive economies amid the global recession. U.S. President-elect Barack Obama this month promised the biggest investment in the nation’s infrastructure since the 1950s. Stepping In “The government must step in,” Rudd told reporters in Canberra today, adding the budget would remain in surplus. “It must be in a temporary and targeted fashion.” Rudd earlier today announced a A$440 million tax break for small businesses, which employ 1.7 million people. The infrastructure spending, which will be spread over the next four years and create some 32,000 jobs, includes A$1.2 billion on rail, A$1.6 billion on education and about A$1.6 billion as an investment incentive. “This package goes a long way toward addressing the lack of adequate investment in rail infrastructure,” said Mark Irwin, managing director of GrainCorp Ltd., eastern Australia’s largest grain handler. Some A$580 million has been given to develop a new rail link between the Hunter Valley and Newcastle port, the world’s biggest coal-export harbor. Works are scheduled to be finished in 2011 and will generate 650 direct jobs. Rate Cuts “In the midst of the current downturn, it is critical that export impediments and supply constraints are removed,” Minerals Council of Australia chief executive Mitch Hooke said in an e-mailed statement. “This will ensure business is able to fully capitalize on an expected re-correction in global economic conditions in the mid-term.” The threat of Australia’s first recession in 17 years has prompted Reserve Bank of Australia Governor Glenn Stevens to embark on the most aggressive round of interest-rate reductions since a recession in 1991. Consumers and businesses are reeling from a 43 percent slump in the benchmark Australian S&P/ASX 200 stock index and the biggest decline in home prices since 1978. Australia, the world’s biggest shipper of coal and iron ore, has benefited from demand in China, the world’s fastest growing economy. Exports make up one-fifth of Australia’s economy. China is Australia’s biggest trading partner, with two-way trade worth A$57.9 billion in fiscal 2008, including A$12.42 billion of Australian iron ore exports, government figures show. China’s economy grew 9 percent in the third quarter, the least in five years. The World Bank is forecasting China’s economy will expand by 7.5 percent next year, which would be the slowest pace since 1990. To contact the reporter on this story: Gemma Daley in Canberra at gdaley@bloomberg.net

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