PENSIONERS, families and those on low incomes are in line for an early Christmas present, and there will be measures to stimulate the housing market, as the Government prepares to spend a large slice of the budget surplus.

In addition to bringing forward billions of dollars in infrastructure spending to ensure long-term growth, the Government will spend the majority of the budget surplus on households to stop the economy sliding into recession.

It is leaning towards measures that would ensure the money is injected quickly into the economy, by making welfare recipients and those on low incomes priorities because they tend to spend extra cash on necessities rather than save it.

"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," said the Prime Minister, Kevin Rudd.

"We will deploy the surplus in the interests of underpinning long-term positive growth in the Australian economy and in the interests of supporting the household economy as well."

The Herald learned another measure to inject money quickly into the economy involved stimulating housing. One theory concerned the Government paying stamp duty for home buyers, but the Government would not confirm or deny this.

Mr Rudd's plan to spend the nation out of trouble followed his decision on Sunday to guarantee the $1.2 trillion held in deposit accounts as well as bank borrowings.

This prompted the best economic news in weeks, the sharemarket posting its biggest one-day gain in more than 10 years, as investors poured back into bank shares.

The sharemarket rose more than 5 per cent, regaining more than half of its losses from last Friday, when shares fell 8 per cent, the biggest fall since the 1987 crash. ANZ shares rose 13 per cent yesterday.

The Government's decision to guarantee bank borrowings - designed to "unclog the arteries of the global financial system" - provided relief in the wholesale money markets where banks source some of their funds.