Rudd's entire speech below
EMERGENCY tax cuts could be introduced in a fresh bid to prop up the economy as the Federal Government reels from the latest warning signs that Australia is heading into recession.
Prime Minister Kevin Rudd, on his first day back from a three-week summer holiday, warned yesterday that the global economic crisis would get worse before it got better.
In a speech in Sydney, he called on bosses to do everything possible to protect their workers from dismissal and for workers to restrain any wage claims.
He also signalled that the Government was preparing to announce initiatives to add to the $36 billion of measures it had already undertaken to reinforce the economy.
Mr Rudd said the impact of the crisis would be big "but so will be our response.
"We are determined to chart a course that will see Australia through this crisis. We will do so with a combination of steely economic management and compassion for those who need support"...
But it was Treasurer Wayne Swan who fuelled tax cut speculation, saying Australia was in a strong position "to respond with further packages, whether it would be packages which would stimulate consumption through changes in tax, for example, or whether it was via a combination of investment in infrastructure and other measures".
He did not indicate, however, whether he was talking about cuts to personal or business taxes, or bringing forward personal income tax cuts already legislated for July this year.
Mr Rudd, at the first of a series of Australia Day events he will address over the next week, said all Australians had to "look out for each other" in the worst economic convulsion since the Great Depression.
"We are all in this together: business, unions, governments, the community sector — and every nation in the world," he said. "The current economic turmoil is unlike any we have seen in our lifetime — and unlike any since the Great Depression of 1931."
Mr Rudd said the protection of jobs had to be a top priority, and both employers and workers had a responsibility towards each other.
"Employers must do their utmost to protect their workers from dismissal, knowing that these workers will serve them well when times turn good again," he said. "Workers, too, must restrain any wage claims.
"I know there are employers who have asked their workers to accept shorter working hours rather than lose their jobs.
"That encourages me, because at this time Australians need to look out for each other — as we have done so many times in the past when the going has got tough.
"As I travel around the country, I sense a steadiness among our people — an awareness that times are hard, but also a willingness to help each other, to stick together. I have not the slightest doubt that we as a people will rise to the challenge that lies ahead of us."
The speech came a day after Access Economics became the first mainstream forecaster to state that Australia was heading into recession.
Despite Access' claim that Victoria was "on the brink of recession", state Treasurer John Lenders yesterday was standing by his forecast of 1.5 per cent economic growth this year.
A spokesman for Mr Lenders, Matt Nurse, said the global crisis had affected the Australian and state economies "as predicted", but Victoria was as well placed as anywhere to deal with it.
"Victoria has strong population growth, record levels of government investment in infrastructure, the highest level of building approvals in the country and our retail trade sector continues to grow," he said.
ANZ chief economist Saul Eslake yesterday downgraded his assessment of the international outlook, saying it would be reasonable to speak about the US and the UK entering "depressions" rather than recessions. He expected Australia's Reserve Bank to cut its cash rate to an all-time low of 3 per cent in a bid to avoid an Australian recession.
The Melbourne Institute's updated inflation gauge, released yesterday, suggests that the Reserve will find few impediments to further cutting interest rates next month.
It found that prices fell in each of the last three months of last year, producing a negative quarterly inflation rate.
"These are unusual times," said the institute's Professor Don Harding. "Based on the inflation gauge, we forecast that the December quarter consumer price index will fall 0.45 per cent. Lower petrol and fruit and vegetable prices are bringing the index down," he said.
The Bureau of Statistics reported that new borrowing slid a further 6 per cent in November, to take it down 30 per cent on a year ago.
Commercial borrowing fell 10 per cent, lease finance 3 per cent and personal borrowing 2 per cent. Lending for housing climbed 1.4 per cent.
RUDD'S NSW AUSTRALIA DAY ADDRESS
Premier Rees and distinguished guests.
The meaning of Australia Day
I acknowledge the First Australians on whose lands we meet, and whose cultures we celebrate as the oldest continuing cultures in human history.
It is always good to speak at Australia Day events, because it gives me a chance to talk about our country.
Where we are heading.
What challenges are before us.
And what steps we are taking, as a nation, to meet them.
It is particularly good because Australia Day comes at such a great time of the year.
Over the summer, most of us have had a chance to rest, to spend time with family and friends, to enjoy the bush, the beach or the backyard, and to recharge our batteries ahead of the New Year.
Australia Day is a day in which – through our honours system and the Australian of the Year Awards – we recognise and thank Australians who inspire us – in the local community, in education, health, business, sport, the arts, and in so many fields.
Through their example, we see the best of what we can be as a nation and as a people.
But this year the nation is overshadowed by uncertainty and anxiety over the global financial crisis at our door.
I understand that worry, and I can tell you that 2009 is going to be a tough year.
The current economic turmoil is unlike any we have seen in our lifetime – and unlike any since the Great Depression of 1931.
It is not a crisis of Australia’s making, but it will hurt Australia, as it is hurting every other country.
Over the next week, starting today, I plan to deliver a series of addresses on the global economic situation, how it will affect Australia and our framework for responding.
I am doing this because I intend to be absolutely straight with Australians about the impact of the crisis, and what we intend to do about it.
The impact will be big.
But so will our response.
In fact, it’s been substantial so far, including $36 billion of new measures.
We are determined to chart a course that will see Australia through this crisis.
We are determined to navigate that course and to craft a more resilient Australia as a result.
We will do so with a combination of steely economic management and compassion for those who need support.
And we intend to prevail through the energy, innate optimism and decency of the Australian people.
The unprecedented impact of the GFC
The magnitude of the global financial crisis almost beggars belief.
By next year, up to 25 million people around the world may have lost their jobs, according to the OECD.
In the United States, the origin and epicentre of the earthquake, nearly three million jobs were lost last year – the largest decline since World War Two.
In December alone more than half a million people lost their jobs.
Global share markets have lost half their value since they peaked in October 2007 – the greatest fall since the Great Depression.
That is $32 trillion – the equivalent of the total annual GDP of the G7, the group of seven of the world’s wealthiest nations.
The Australian share market has been hit as well: it fell by 43 per cent last year, the largest annual fall since records began in 1982 – and twice the previous largest calendar year fall.
It is now clear that even though global capital markets helped drive the strongest period of economic growth in three decades, they had become structurally unsound and unsustainable.
A culture of excessive risk taking - a culture of greed - a culture of excess has brought massive economic disruption to global financial markets and the global economy.
These markets were inadequately supervised and, in the period ahead, one of the tasks of the global community will be to devise warning systems to ensure such a disaster never happens again.
The good news is that Australia has weathered the turbulence far better than many similar countries.
Our banks had a very low level of exposure to bad debt generated in the US.
Of the more than 40 major global financial institutions that have gone bankrupt or been bailed out since the crisis began, none are Australian.
However, Australia is not immune from these events, and difficult days lie ahead.
The US, Japan, Germany and the rest of the euro zone - plus, in our region, New Zealand, Singapore and Hong Kong - have all slipped into recession.
Critically, China has been hit much harder than forecasters had predicted.
Its growth has slowed sharply – from 12 per cent in 2007 to 8.5 per cent last year.
Its manufacturing sector – which is 40 per cent of its GDP – has been contracting for five months.
Because China takes 15 per cent of our exports, its slowdown will affect Australia.
Taking unprecedented steps to respond
This is an unprecedented crisis that demands an unprecedented response.
In October, for the first time in our history, the Government guaranteed deposits of up to $1 million in all banks, building societies and credit unions.
Our Economic Security Strategy injected $10.4 billion into the economy via payments to pensioners, low and middle income families and first home buyers.
We made a $6.2 billion commitment to strengthen Australia’s automotive industry, which directly and indirectly supports 200,000 jobs.
And last month we announced a $4.7 billion nation-building plan to invest in ready-to-go infrastructure projects in road, rail, ports and education.
These are investments that will not simply stimulate the economy now – they will build Australia for the long term.
The industries we are investing in – including education, information technology and renewable energy – are industries of the future that will ensure Australia emerges from this downturn with a stronger, more diverse economy.
We are all in this together
This is a difficult time, and in the short term there is no quick fix.
Things will get worse before they get better.
That is where all of us – not just government – have a role in lessening the effects of the crisis.
We are all in this together: business, unions, governments, the community sector – and every nation in the world.
In these times, employers must do their utmost to protect their workers from dismissal, knowing that these workers will serve them well when times turn good again.
Workers, too, must restrain any wage claims.
I know there are employers who have asked their workers to accept shorter working hours rather than lose their jobs.
That encourages me, because at this time Australians need to look out for each other -- as we have done so many times in the past when the going has got tough.
I repeat – we are all in this together.
Right now it’s jobs that matter most – because the global financial crisis has been the destroyer of jobs.
As I travel around the country, I sense a steadiness among our people – an awareness that times are hard, but also a willingness to help each other, to stick together.
I have not the slightest doubt that we as a people will rise to the challenge that lies ahead of us.
And we will emerge from this a stronger, more resilient nation than before – and a nation which never loses its heart