Government bail out states

The Rudd Government has taken swift steps to bail out the underperforming states, with a federal government guarantee of up to $150 billion, ensuring the states will be able to raise cash more easily on international credit markets and road and building works.

Following a meeting with state treasurers in Canberra yesterday, federal Treasurer Wayne Swan agreed to provide a temporary and voluntary guarantee, supporting around $39 billion of debt.

“State government bond markets have been hit hard by the global recession. This has threatened the capacity of state and territory governments to deliver critical infrastructure projects that will support jobs in the face of the global recession, as well as boost productivity and improve living standards in the medium and long term.”

Mr Swan said the federal and state governments, through the loans council process, would need to “keep an eye on total borrowings and what the borrowed money was being used for”.

The Loans Council yesterday approved $34 billion in federal borrowing for 2009-10. Of the amount approved for the states, $8.8 billion was allocated for Queensland, $6.6 billion for NSW, $5.2 billion for Victoria and $3.1 billion for Western Australia.

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