The Securities and Investments Commission told mortgage funds late yesterday that, on request, it would amend the rules governing their operation to allow them to give preference to people in genuine hardship when deciding who gets access to limited funds.
At present the funds are required to treat all members equally when deciding whether to allow redemptions.
The change would allow them to give preference to members who are "unable to meet reasonable and immediate family living expenses". Those members would be limited to withdrawing a maximum of $20,000 each, plus half of the balance of their investment. This would mean that a member with $100,000 in a frozen fund would get access to $60,000.
ASIC chairman Tony D'Aloisio defended the cap, saying it would ensure hardship cases continued "to participate in the risks and rewards of the investments along with other members".
The Investment and Financial Services Association welcomed the move as "genuinely good news".
"ASIC needs to be commended for the work they have done and the time they have done it in," association chief executive Richard Gilbert said.
But he could give no guarantee that every one of the 15 or so funds that have frozen redemptions would take advantage of the offer..
"It will depend on the circumstances of each fund and the liquidity of the fund and its cash flow," he said. "We will do our best to expedite the process but I can't put days or weeks on it."
Mr Rudd adjusted his language on the economy, openly countenancing the possibility of a recession.
Avoiding a recession was "the core challenge of the Government," he told Fairfax radio.
Mr Rudd said he agreed with the Reserve Bank deputy governor that Australia probably could avoid a recession but that "the other thing to say in levelling with people is that this will be tough, very tough".
"Most other developed economies around the world are either in recession or heading there right now, and we are part of a global economy," he said.
Reserve Bank data released yesterday showed consumer credit shrinking faster than at any time since the 1991 recession as households paid off debts or decided against new borrowing.
ANZ economists said that underlying consumer debt might be shrinking even faster than the September figures suggested as they would have been artificially boosted by borrowing to cover margins in a month in which the share market fell 10%.
Mr Rudd said he was confident that "a fair whack" of the bonus payments the Government would be sending to pensioners, families and carers in December would be spent but that he could not be certain.
"At the end of the day I can't predict what each individual consumer is going to do with their money," he said, adding that this was "one of those times when the entire nation will try very hard to pull together".
Other data released yesterday showed that home sales fell further in September despite that month's 0.25 percentage point interest rate cut and a further 4.5% slide in job vacancies in October.
