KEVIN RUDD steeled Australians for the effects of the global financial meltdown but said the Government was working to “maintain positive growth”.
“Some of the options could be bringing forward major infrastructure projects or one-off measures to help small business set to suffer,” the Prime Minister said yesterday.
Investors will nervously watch the opening of the Australian share market this morning after the International Monetary Fund yesterday made dire predictions about almost zero growth for many major world economies.
Local shares are tipped to open flat, although Commsec economist Craig James said predicting the share market at the moment was “like predicting horse racing”.
The news came as Europe agreed on a bank rescue plan, which would guarantee medium-term loans between banks, and also take steps to recapitalise and if necessary restructure failed banks.
Jobs market to tighten
Economist Shane Oliver of AMP Capital predicted that, as the world chaos hit Australia, the jobless rate could blow out to 6 per cent by June.
“The big worry for Australians is rising unemployment, people cut back on spending and there is a risk to the housing market,” he said.
Last week there was carnage on financial markets and last Friday the share market fell 8 per cent, losing $90 billion in value.
“This global financial crisis has entered a new and dangerous phase with real consequences for growth, for jobs and therefore for the future,” Mr Rudd said.
In a pre-emptive strike, Mr Rudd unveiled a three-pronged attack to secure the Australian banking sector.
Under the plan, all deposits with banks, building societies and credit unions will be guaranteed no matter how much they hold.
“The Australian government will guarantee all deposits whatever their size in all Australian banking institutions for three years,” Mr Rudd said.
An extra $4 billion will be injected into the mortgage market in a move to help non-deposit lenders to survive and prop up property prices.
Mr Rudd insisted that move was not a sign of desperation but a response to moves by foreign governments that left Australia at a disadvantage.
In a rare show of bi-partisanship, Opposition Leader Malcolm Turnbull backed the move on bank accounts saying the Coalition would support the legislation.
Speaking from Washington where he attended crisis talks, Treasurer Wayne Swan yesterday said the Government expected to meet all its election promises but would review its spending commitments as the global financial crisis enters a “new damaging phase” and impacts on Australia’s growth.
Mr Swan yesterday attended an emergency meeting of the Group of 20 finance ministers including Australia, China and India – as well as a meeting of the IMF.
IMF head Dominique Strauss-Kahn gave a grim warning: “intensifying solvency concerns about a number of the largest US-based and European financial institutions have pushed the global financial system to the brink of systemic meltdown”.
Mr Swan has also vowed to name and shame banks that fail to pass on the full amount of last week’s interest rate cut as soon as the current world financial turmoil eases.
Mr Swan said while he did not have any mechanism to force banks to pass on the cut, he would pressure banks to do the right thing.