The Australian government announced on Tuesday it would pour $7.4 billion into Australia's economy to try to protect it from the global financial meltdown.
"The global financial crisis has entered into a new, dangerous and damaging phase," Prime Minister Kevin Rudd told reporters after his Cabinet approved the huge funding injection over the next three years.
The spending injection - which amounts to 1 per cent of Australia's gross domestic product - sharply increases the level of intervention in the crisis by a government that at the weekend announced it would guarantee all bank deposits.
Most of the money will be drawn from a $15.3 billion budget surplus forecast for the fiscal year ending June 30, 2009, which has been built partly on the back of a resources boom in the minerals-rich country in recent years.
"The purpose of a surplus in the budget is to deal with tough times and tough times are with us," said Rudd.
He said the government intended to continue delivering budget surpluses, but he warned of a "bumpy road ahead" and that he would take "whatever action is necessary" to underpin growth and Australia's financial system.
Most of the money will go toward increasing pensions and family welfare payments, increasing grants to first home buyers and to infrastructure projects.
Rudd said the strategy "will strengthen the national economy and support Australian households, given the risk of a deep and prolonged global economic slowdown."
Treasurer Wayne Swan, the government's top economic minister, said the dramatic injection of funds was necessary because of the scale of the financial crisis.