Pm Holds The Line On Spending

The Age

Tuesday December 9, 2008

COLIN BRINSDEN

PRIME Minister Kevin Rudd expects there will be criticism of his Government's decision to flood the economy with cash, but says to do nothing to support jobs would be worse.

The first of $8.7 billion worth of one-off government payments aimed at stimulating the economy started rolling into the accounts of pensioners, carers and low-income families yesterday as newly released data suggested the jobless rate could soon start rising rapidly.

Mr Rudd has urged recipients to spend the cash handouts in the run-up to Christmas to give the flagging economy a much-needed boost in the face of a global economic downturn.

"I know the Government will inevitably face some criticism about how some of this money will be spent," Mr Rudd said in a speech in Canberra.

But he believes the cash payments are the best way to stimulate the economy. "If the Government doesn't empower consumers at a time like this in the midst of a global financial crisis then, in fact, it will have even greater challenges ahead."

A key pointer for future employment - job advertising - suggests the outlook is grim. The latest ANZ Jobs Advertisement Series showed newspaper ads fell by 12 per cent in November to be 42.7 per cent down on a year earlier and at their weakest level since 1991, when Australia was last gripped by recession.

ANZ head of economics Warren Hogan said the data indicated the unemployment rate was likely to rise rapidly over the next six months.

Economists expect the jobless rate to jump to 4.5 per cent from 4.3 per cent in Thursday's official labour force data for November.

Treasurer Wayne Swan said the stimulus package would add 75,000 workers to the economy and as much as 1 per cent to economic growth.

"(But) if further action is required, all options are on the table," he said.

Opposition Leader Malcolm Turnbull described the package as the economic equivalent of a "one-off sugar hit".

"If you want a more effective fiscal stimulus, tax cuts, across-the-board tax cuts, particularly targeted at lower and middle-income earners, are going to have a greater impact," he said.

"People will see them as being permanent, they'll see them as encouraging work, to invest, to hire people and so forth."

The stimulus package appears to have come too late for retailer Harvey Norman, a company normally associated with plasma TV sales. Its boss Gerry Harvey has warned the company may have to close some stores in the next six months because of the economic slowdown.

KEY POINTS

Cash payments start to flow into accounts.

Jobless rate tipped to climb to 4.5 per cent.

Opposition calls for across-the-board tax cuts.

© 2008 The Age

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