Jobs to go, despite signs of hope: Rudd

21 Jul 2009, 7:09 pm   -   Source: AAP
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More Australians are likely to lose their jobs even as the economy shows signs of recovery, Prime Minister Kevin Rudd says.

More Australians are likely to lose their jobs even as the economy shows signs of recovery, Kevin Rudd says.

The prime minister recited a well-worn phrase as a major economic forecaster said unemployment may not be as bad as feared.

"There are some positive signs in the global economy, we're not out of the woods yet and unemployment will continue to rise," Mr Rudd told reporters on Tuesday.

Access Economics says unemployment may peak at 7.5 per cent, a level much lower than Treasury forecasts of the jobless rate hitting 8.5 per cent in the next financial year.

Treasurer Wayne Swan, however, has stuck by the official forecasts made in the May budget, saying no revisions would be made before the Mid-Year Economic and Fiscal Outlook is released later this year.

"It doesn't show that we're out of the downturn, it shows that the worst of the global economy may be behind us but that we will live with the consequences of the global recession for some time to come," Mr Swan said.

Shadow Treasurer Joe Hockey said massive government spending would push up interest rates.

"Please prime minister, start pulling back on the borrowed spending, because it is going to slow down Australia's future growth," he told reporters in Sydney.

Coalition employment spokesman Michael Keenan said unemployment may not be as high as the government expects.

"Eight point five (per cent) might be a bit pessimistic based on what we know at the moment," Mr Keenan told AAP.

The Reserve Bank of Australia (RBA) also believes unemployment may be contained.

"Labour market indicators were likely to remain soft for some time, though there were signs that employers were making efforts to minimise job shedding," the minutes of the central bank's July meeting released on Tuesday said.

But the good news for home buyers is the RBA is still open to the idea of cutting interest rates, now at a 49-year low of three per cent.

"Members noted that the current inflation outlook afforded scope for some further easing of monetary policy, if that were needed to give further support for demand at a later stage," it said.

In another sign of economic recovery, motor vehicle sales rose in June for the third consecutive month, Australian Bureau of Statistics figures showed.

The 5.7 per cent increase last month also was the steepest monthly rise in four-and-a-half years.

It coincided with the small business investment allowance rebate being raised to 50 per cent, from 30 per cent, for items costing more than $1,000.

"I welcome the effectiveness of the small business tax break in sustaining car sales during these challenging economic times," Small Business Minister Craig Emerson said about the allowance for firms with a turnover of less than $2 million.

With any economic recovery comes the threat of higher interest rates.

While inflation is showing some signs of moderation, the experts still expect some price pressure measures to print on the high side when official consumer price index data is released on Wednesday.

Mr Swan has ruled out bringing in a third stimulus package, as advocated by the union movement, but he committed to keeping existing programs in place just in case the economic recovery takes a while to materialise.

"To withdraw that stimulus would be utterly irresponsible and be a recipe for higher unemployment," he said.

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