Nov. 8 (Bloomberg) -- Australian Treasurer Wayne Swan said it’s too early to retract government stimulus because winding up the program would threaten jobs and the economic recovery.

“Keeping in place the stimulus is entirely appropriate,” he said on ABC television. “If we were to simply withdraw stimulus, that would pull the rug out from under the recovery, and that would result in far higher unemployment.”

The Australian stimulus peaked in June and will be gradually withdrawn this year and in 2010, Swan said in the interview on the Insiders program broadcast today.

Prime Minister Kevin Rudd is under mounting opposition pressure to peel back the A$42 billion ($38 billion) stimulus faster as the economy recovers and interest rates rise toward pre-crisis levels. Australia’s central bank said this week the nation’s economy will expand at more than three times the pace forecast in August, and signaled it will continue to lead the world in raising rates.

The Group of 20 nations, meeting in St. Andrews, Scotland, yesterday agreed to maintain stimulus measures until recoveries take hold.

In Australia, the government’s stimulus spending and interest-rate cuts by the Reserve Bank of Australia are working against each other, the Sydney Morning Herald reported today, citing a speech by Opposition Leader Malcolm Turnbull. He called for Rudd to take “responsible action” on the economy.

Popular Criticism

“It’s popular to criticize the economic policy of the Australian Government and the RBA,” Shane Oliver, head of investment strategy at AMP Capital in Sydney, said in a Nov. 6 note. “Their foresight and quick response last year and early this year has played a major role in helping Australia come through the global financial crisis.”

Swan rejected the criticism from Opposition Leader Turnbull, saying the fiscal stimulus was being wound down gradually in tandem with rising borrowing costs and economic growth.

“Fiscal and monetary policy are working together,” Swan said on ABC. “Both are being gradually withdrawn but both are expansionary.”

Swan, in the U.K. for the G-20 meeting, said the government also had to factor in the state of the worldwide economy.

“People here are cautious,” said Swan. “We have to take into account the global context as well as the situation in our domestic economy.”

The unemployment rate in the U.S. jumped to 10.2 percent in October, the highest level since 1983, and Treasury Secretary Timothy Geithner said yesterday the U.S. economy requires “continued policy support” to recover from the financial and economic crisis.

Australia’s central bank governor, Glenn Stevens, raised the overnight cash rate target by a quarter percentage point in October and last week to 3.5 percent. The country’s gross domestic product will rise 1.75 percent this year and 3.25 percent in 2010, Stevens said on Nov. 6.

For Related News and Information: For Related News and Information: Australian economy stories: NI AUECO BN <GO> Top economic stories: TOP ECO <GO> Worldwide economic monitor: GEW <GO> Global currency rankings: WCRS <GO>

Last Updated: November 7, 2009 22:42 EST