Treasury says jobless rate to rise

The Australian economy still faces a difficult time despite the efforts of world
leaders to kick-start global growth through a ground-breaking agreement at the G20
Summit in London.
Treasury Secretary Ken Henry confirmed on Friday the jobless rate would be higher
than seven per cent next year, well above the latest reading of 5.2 per cent.
Still, there will be a sigh of relief among many households after the High Court
rejected a challenge to the legitimacy of the government's $7 billion worth of tax
bonuses.
Tax commissioner Michael D'Ascenzo said the 7.4 million people who had already
lodged 2007-08 tax returns would begin receiving their tax bonus payments from next
week.
The payments form part of the government's latest $42 billion stimulus package.
The sharemarket built on recent strong gains after the G20 Summit agreed to a range
of initiatives, while the Australian dollar at one stage hit a three-month high
above $US0.72.
"The G20 communique surprised the markets with a wealth of detail on plans to shore
up the global financial sector and ensure that the IMF's forecast of two per cent
growth for 2010 is given every chance to be achieved," NAB Capital chief economist
Rob Henderson said.
This included a pledge of $US1.1 trillion ($A1.6 trillion) to be made available
through the International Monetary Fund to restore credit growth, jobs and the world
economy.
"It's better than probably most people anticipated," Nomura Australia chief
economist Stephen Roberts said.
Treasurer Wayne Swan, who was in London for the summit, said the G20 nations had to
do everything possible to prevent a prolonged global recession.
"If we can stabilise the international financial system and get growth going again,
then the impacts that we are beginning to feel in Australia can be cushioned," he
said.
Nonetheless, next month's budget papers are likely to prove grim reading with
forecasts for Australian economic growth expected to be downgraded further, pushing
the jobless prediction even higher.
In February, in the Updated Economic and Fiscal Outlook, Treasury had forecast a
seven per cent unemployment rate by June 2010.
"The unemployment rate, because of continuing global weakness, will be higher than
we had forecast," Dr Henry said after a speech to a welfare conference.
"You will have to wait until the budget to find out what our forecast is," the
Treasury chief said.
Mr Swan will hand down the budget on May 12.
Labour force data for March will be released next Thursday.
Mr Roberts expects the unemployment rate could make another jump to 5.4 per cent,
which would be the highest rate since September 2004.
Before then, the Reserve Bank of Australia (RBA) will hold its monthly board meeting
and economists expect another line-ball call on interest rates.
The central bank left its key cash rate unchanged at a 45-year low of 3.25 per cent
at its March meeting having made 400 basis points worth of reductions since
September.
An AAP survey of 19 economists found 10 expecting a cut on Tuesday, with seven
favouring a move of 50 basis points and three leaning toward a smaller 25 basis
point cut.
The remaining nine believe there will be no change.
Financial markets are priced for a greater than even chance of a 50 basis point
reduction.