Australia will avoid recession: Rudd

(APP) - Prime Minister Kevin Rudd says he is confident Australia will avoid a recession despite predictions of rising unemployment and the global financial crisis hurting other countries.

Mr Rudd's comments came as new figures show home sales fell for the sixth time in
nine months and annual credit growth running at its slowest pace in six years.
The prime minister said he agreed with Reserve Bank of Australia (RBA) deputy
governor Ric Battellino's comments on Thursday that Australia was well placed to
cope with the global downturn and could avoid a recession.
"I certainly agree with what the deputy governor said, because this is the core
challenge of the government to do whatever is necessary to support positive economic
growth," Mr Rudd told the Fairfax Radio Network, on Friday.
"This will be tough, very tough because most other developing economies around the
world are either in recession or heading there right now, and we are part of a
global economy."
He said the RBA's cut of a full percentage point in the official cash rate early
this month, and the government's $10.4 billion economic stimulus package, were aimed
at avoiding a recession.
But the economic downturn will have an impact on the labour market with the jobless
rate expected to rise above the government's forecast 4.75 per cent by June next
year.
"The global financial crisis and looming recessions in so many parts of the globe -
problems in the US, the UK, declining growth rates in China - we expect that to have
impact on our economy," Deputy Prime Minister Julia Gillard said.
"We are not immune from these events. So we do expect unemployment to rise above the
budget forecast."
She said it would be unhelpful to speculate on the unemployment figure to be
published in next month's Mid-Year Economic and Fiscal Outlook (MYEFO).
Economists will look to the MYEFO for predictions of economic growth.
To date the government and Treasury have only said it would be a little over two per
cent for the current financial year.
"Forecasters are taking the axe to their growth projections for the Australian
economy," Commonwealth Bank of Australia chief economist Michael Blythe said.
"Some commentators have gone as far as putting a recession as the base case. In the
current climate it is easy to see why."
He said no economist could explain recent events including stock markets trading
through a 1,000 point range in a day, or currencies moving through a five to six
cent range in a day.
"These moves have nothing to do with the economic fundamentals," he said.
"Fear and loathing are the dominant themes."
Reserve Bank assistant governor of financial markets Guy Debelle said local markets
had stood up well to recent events.
"The daily turnover in the cash market has been relatively constant throughout and
has been largely unaffected by the size of exchange settlement balances," Dr Debelle
told the Finance and Treasury Association congress in Melbourne.
"Thus a crucial part of the financial system, which lies right at its heart, has
continued to function well."
The RBA's credit data for September showed total annual demand slipped to just 10.1
per cent, its lowest level in six years and in sharp contrast to the 16 per
cent-plus growth rates seen earlier this year.
The Housing Industry Association's (HIA) month home sales report also showed a
further 1.8 per cent fall in September.
Both sets of data followed the RBA's quarter of a percentage point interest rate cut
in September, but do not take account of this month's full percentage point
reduction.
Economists expect the cash rate will be cut by a further 50 basis points to 5.5 per
cent at next Tuesday's Reserve Bank monthly board meeting.