(Adds treasurer, economists comments)
By James Grubel
CANBERRA, Dec 8 (Reuters) - The Australian government delivered more than A$8 billion ($5.2 billion) in cash payments to families and pensioners from Monday to stop the economy from sliding into recession and urged people to spend the money ahead of Christmas.
The cash is part of a A$10.4 billion economic stimulus package announced on Oct. 14 and aimed at boosting consumer confidence and retail sales as Australia fights off slowing growth and rising unemployment due to the global downturn.
But rather than pay off debt, the government wants people to spend the money in the run up to Christmas, saying the spending will help protect jobs and save the economy from further slowing.
"I've urged pensioners and families to spend this money responsibly, to use this money to make ends meet, to help out their kids and help out their grandkids," Prime Minister Kevin Rudd said on Monday.
"If the government doesn't empower consumers at a time like this, in the midst of global financial crisis, then in fact we will have even greater challenges ahead."
The payments come after official data showed Australia's economic growth slowed to 0.1 percent in the September quarter, its slowest pace in 8 years, and with unemployment set to rise due to the fallout from global slowdown.
The cash payments worth A$8.7 billion, or about 0.9 percent of gross domestic product, give 2 million families A$1,000 for each child, and give four million pensioners more than A$1,000 each. The money will be paid directly into bank accounts over two weeks.
PRE-CHRISTMAS BOOST
Treasurer Wayne Swan said the payments would boost gross domestic product by between 0.5 and 1 percent, and create up to 75,000 jobs.
"This package is a substantial boost to our economy," Swan said, adding the government would keep all options open if further action was needed in 2009 to keep the economy growing.
"We will assess that as we go through the early part of next year."
The government said it expects to make A$4 billion in payments by Thursday, and business hopes the money will revive sagging retail sales and give retailers a pre-Christmas boost.
"If people are saving for a rainy day, I can tell them it is pouring outside," Australian Retailers Association executive director Richard Evans told Australian radio.
Economists said the package would be a welcome boost to the economy, on top of interest rate cuts from the Reserve Bank amounting to 3 percentage points since September, and would help keep the economy growing.
Westpac's director of economics and research Bill Evans said he expected consumers would spend about A$3.5 billion of the stimulus payments, and save the remainder.
"That would be enough to keep GDP growth in positive territory over the three quarters to June 2009, although growth would be painfully weak and certainly not sufficient to stop the unemployment rate rising towards 6 percent through 2009," he said.
TD Securities senior strategist Joshua Williamson said the spending package would not be enough to lock in long-term growth.
"As the package is a temporary measure, any growth on the consumption side of the national accounts in the December quarter from the package will unwind just as quickly in the first quarter of 2009." ($1=A$1.54) (Editing by James Thornhill & Jan Dahinten)