Sydney - Prime Minister Kevin Rudd on Tuesday announced a 42-billion-Australian-dollar (27-billion-US-dollar) spending programme as he sought to stop the faltering Australian economy from lurching into recession.

Rudd last raided the piggy bank in October for a 10.4-billion-Australian-dollar package of one-off payments to low-income families, first-time house buyers and pensioners.

The latest stimulus package is more of the same: one-off payments to families, farmers and the unemployed.

But this time, as well as hand-outs to households and 2.7 billion Australian dollars in tax breaks for small businesses, there will also be infrastructure spending to pump-prime an economy that is guttering after 17-consecutive years of growth.

The centrepiece of the fiscal package is a 14-billion-Australian-dollar programme to renovate schools and provide free roof-cavity insulation for 2.7 million homes.

The second stimulus package would help tip the budget into a 22-billion-Australian-dollar deficit this year from a 21-billion-dollar surplus when the Rudd government took office 14 months ago.

"We're going to move heaven and earth to try and support growth," Rudd said. "The truth is that the global recession in general and the collapse in China's growth in particular has produced a 115-billion-Australian-dollar fall [over four years] in Australia's tax receipts to the government."

Rudd timed his announcement to coincide with the announcement of a widely tipped easing of monetary policy by the Reserve Bank of Australia, the nation's independent central bank.

The bank cut its benchmark interest rate by 1 percentage point to 3.25 per cent - the fifth cut in as many months.

"In making its decision, the board took into account the package of measures announced by the government earlier today," bank Governor Glenn Stevens said. "The combination of expansionary monetary and fiscal policies now in place will help to cushion the Australian economy from the contractionary forces coming from abroad."

Chris Richardson, director of the consulting firm Access Economics, said the package would not stave off a recession but might lessen its severity.

"It won't stop 2009 being a rotten year but does put in place the building blocks for recovery in 2010," Richardson said.

"So far, we've been much less affected than any other place, but there remains a risk that we get caught in this as badly as anywhere else," he added.

He warned that the fiscal measures could feed into a boom-bust-boom cycle.

"The risk of government action is that it ends up not so much defending against the downturn as ramping up the recovery," Richardson said. (dpa)