Oct. 13 (Bloomberg) -- Australian Prime Minister Kevin Rudd said the government will ``deploy'' its budget surplus to support households and the economy as a global financial crisis freezes credit and slows growth.

``The purpose of the surplus is to deal with tough times ahead, and my message to the nation today is those tough times have arrived,'' Rudd told parliament in Canberra today. ``The government remains determined to deploy that surplus to deal with the long-term support of economic growth.''

Rudd's spending pledge follows an announcement yesterday the government will guarantee all deposits with institutions for the next three years and all ``term wholesale funding'' by Australian banks operating in international credit markets amid a worsening global financial crisis.

A global lending freeze threatens to push the world into recession, slashing prices for the commodity exports that have fueled Australia's 17-year economic boom.

The government in May forecast a A$21.7 billion ($14.3 billion) budget surplus for the year ending June 30 and a A$19.7 billion surplus the following year. It also cut income taxes by a total of A$46.7 billion over the next four years.

``Whether it's welfare payments, pensions, unemployment benefits or family payments, there's a whole range of government payments, or changes in the tax system,'' Finance Minister Lindsay Tanner told Australian Broadcasting Corp. radio earlier today, adding the financial crisis had already affected jobs and economic growth.

Rudd, 51, yesterday also doubled to A$8 billion the government's investment in residential mortgage-backed securities to bolster the home-lending market. Treasurer Wayne Swan announced a A$4 billion investment on Sept. 26.

``We are well positioned to weather this crisis,'' Rudd said. ``We have taken the necessary steps yesterday to assist in continuing to stabilize the Australian financial system and to ensure that stability that we already have will be maintained in to the future given what is happening in the global marketplace.''

To contact the reporter on this story: Gemma Daley in Canberra at gdaley@bloomberg.net

Last Updated: October 13, 2008 00:46 EDT