Economic crisis spawns depression booklet

The national depression initiative, Beyond Blue has released a booklet to help Australians cope with the global economic crisis.

Beyond Blue chairman, Jeff Kennett says many families will find themselves in financial hardship over the next 18 months.

He says the booklet details strategies on how to cope with stress associated with financial loss and retrenchment.

"It's a booklet that helps to focus our attention through education on the things that we need to do if in fact we're in either of those two categories," he said.

"I think more importantly it's designed to educate us all about how to deal with change that might affect our lives and that of our families."

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Financial crisis hits poor hardest: ACOSS

The Australian Council of Social Services (ACOSS) says the global financial crisis is set to make things worse for the millions of Australians on or below the poverty line.

The global economic situation was a major talking point at the ACOSS annual general meeting yesterday.

ACOSS president Lin Hatfield Dodds says she is urging the Federal Government to use its surplus to increase spending on welfare groups and services.

"If we can't do it now then when?" she asked.

"If we're seriously looking at an economic downturn - and that looks increasingly likely - then the earlier we act the sooner we are going to ameliorate the effects of that downturn."

NSW slumps even further into red

The state's financial woes have deepened as the global financial crisis hits the property and financial markets. NSW went into the red by $493 million last month alone.

This has dragged NSW to a $656 million cumulative deficit for the September quarter, the first quarter of the financial year.

It prompted NSW Treasurer Eric Roozendaal to warn in Parliament today that tough decisions would be made in the November 11 mini-budget.

Last week, the Rees Government disclosed that the surplus for the financial year to June was only $73 million, well short of the $700 million surplus flagged midyear.

With the slump in taxation revenues, this has made it all but impossible that the $268 million surplus forecast for this financial year, ending June 2009, would be achieved.

The mini-budget is aimed at slashing spending in light of the slump in tax revenues.

The NSW Government is also anxious to maintain the state's triple-A creditworthiness rating from credit agencies such as Moody's and Standard and Poor's.

"The Government must reduce recurrent expenses and reprioritise the forward capital program to address the shortfalls in income that are being experienced," Mr Roozendaal told Parliament.

"This means tough but necessary decisions will be announced in the mini-budget to put NSW on a sustainable footing."

Super funds gutted, more cash frozen

THE retirement savings of millions of Australians have been savaged by the global financial turmoil with the average superannuation fund falling 11.6 per cent in the year to September.

The latest bad news about super returns came as the sharemarket hit a four-year low and Colonial First State, the Commonwealth Bank's wealth management arm, froze $3.3 billion of funds invested directly by 61,000 small investors to avoid a run on deposits.

The research agency SuperRatings said the latest fall meant the median balanced super fund had lost 3.4 per cent in value over the first three months of the financial year. Funds have had their worst 12-month performance since compulsory superannuation was introduced in 1992.

Senior Treasury officials and corporate regulators are working on a plan to allow retail investors in frozen funds to withdraw their savings if they would suffer severe personal or financial hardship if their capital remained locked up.

But the Prime Minister, Kevin Rudd, made it clear the Federal Government would not extend its guarantee of bank deposits to funds such as mortgage trusts that are being hit by a flight of capital.

Mr Rudd said bank deposits were fundamental to the financial system but "providing guarantees to market-linked investments, that's quite something else".

"We will work through the implementation of this over a long period of time but market-linked investments go beyond the scope of the guarantee that the Government announced the other day, and we did so directly on the advice of the financial regulators."

The Australian sharemarket fell 1.65 per cent yesterday as investors sold up due to growing fears about an extended global recession. The benchmark All Ordinaries index fell by 63.3 points to close at 3768.3, its lowest in four years.

The latest sharemarket falls would depress super funds' returns further, the managing director of SuperRatings, Jeff Bresnahan, said.

SuperRatings found the median balanced fund - with investments in a mix of shares, bonds, property and cash - posted its fourth consecutive quarterly decline in the three months to September.

Mr Bresnahan said super fund members were increasingly moving out of balanced portfolios and into more conservative cash investment options. Funds needed to improve their communication with members to ensure they did not panic, he warned.

The Government's guarantee of bank deposits earlier this month has contributed to a rash of withdrawals from mortgage trusts and other managed funds as investors try to move their savings into banks.

The Treasurer, Wayne Swan, said he had asked the Treasury Secretary, Ken Henry, and the Australian Securities and Investments Commission chairman, Tony D'Aloisio, to consider ways of helping unguaranteed financial institutions "weather the storm".

"I can't and won't promise instant solutions in a time of unprecedented uncertainty, but I can promise that we will work as hard as possible, consistently and decisively, to resolve as many issues as possible," he said.

Executives from the managed funds industry met government officials in Canberra yesterday and pressed for measures to stem the flight of capital amid concerns that some funds could be forced into fire sales of their underlying assets.

The talks are focusing on two issues: how to provide relief for the minority of investors who will suffer hardship if they cannot withdraw their funds; and wider approaches to restoring confidence and stemming the flow of funds from managed investment vehicles.

Officials said they hoped a plan to deal with hardship cases could be announced by the end of the week.

This is likely to rely on ASIC's powers to exempt managed investment schemes from the Corporations Act's requirement that all investors are treated equally in distributing funds.

The Opposition Leader, Malcolm Turnbull, said the Government's handling of the bank guarantee had been a serious blunder.

"A lot of people are suffering real hardship because of that: their assets have been frozen and that has been as a direct consequence of Mr Rudd and Mr Swan's mistake."

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Dollar dives as investors flee to greenback

The Australian dollar is trading near Friday's closing price of 61.7 US cents this morning after suffering its biggest sell-off since it was floated in 1983 over the weekend.

On Friday the currency hit a five-year low against the greenback of just over 60.5 US cents.

CommSec analyst Juliana Roadley says the dollar could fall below 60 US cents.

"Well here at CBA we are looking that it might move below 60 but moving into the new year, we feel it will stabilise around these levels at the moment," she said.

"There is a lot more water to go under the bridge before we possibly see stability coming back into the markets."

At around 7:00am AEDT the dollar was buying around 61.9 US cents.

In futures trade, the Share Price Index 200 had fallen by 1 per cent, or 37 points, to 3,840.

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The Australian share market has plunged in opening trade after a disastrous session overnight on Wall Street.

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The unemployment rate has jumped from 4.1 per cent to 4.3 per cent.

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The Australian share market plunged 5 per cent today, as the dollar hit a new five-year low. Fear of a global recession has seized markets, with big falls across the major indices overnight.

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Steven Keen has come increasingly to prominence over the past couple of years specialising in the economics of Australia's spiralling household debt burden.

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Australian stocks wiped more than $50 billion off the value of the market today after the US House of Representatives rejected a $US700 billion ($860 billion) plan to rescue the financial system.

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Reserve Bank statistics do not begin to tell the real story of housing stress in Sydney's western suburbs, according to financial counsellor Mike Young.

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Financial crisis will hurt jobs, Swan warns

Job cuts inevitable...Wayne Swan.

Job losses across Australia will be inevitable as the effects of the global financial crisis hit Australian businesses, Treasurer Wayne Swan says.

Economists have predicted national growth could slow to 1.25 per cent next year, resulting in the loss off an estimated 200,000 jobs.

Mr Swan refused to speculate on the extent of job losses but conceded the national unemployment rate would rise.

"There is no doubt that the global financial crisis will have an impact on employment growth in Australia and there is no doubt that we will see over time unemployment move up," he told reporters in Brisbane.

"There is a very big challenge coming Australia's way from the global financial crisis ... that is why we have moved with such speed to boost and strengthen our economy immediately."

The Treasurer said the Government's growth forecasts would be released next month as part of its mid-year economic review.

Future Fund slightly lower on financial crisis fears

The Federal Government's Future Fund has taken a small hit from the global financial crisis.

The fund had a positive return last financial year but in the three months to September it has been slightly negative.

Its overall value is now $63.4 billion, which is fractionally lower than when it was set up more than a year ago.

But Finance Minister Lindsay Tanner says the fund is in good shape and has maintained its value in extraordinary times.

"This is a very significant and positive result... in the circumstances that the Future Fund has been dealing with, given the huge drops in share prices - not only in Australian markets but also internationally and there is every hope, of course, that these share price reductions will be corrected in the medium term," he said.

Related:

More families needing emergency support
The welfare group Anglicare says it is noticing a growing need among working families for emergency relief and housing support.

Freefall Friday: $84b - worst day in 21 years
Australian shares had their worst day since the crash of 1987, losing more than 8%, as mounting recession fears sent equity markets tumbling around the world.

States 'dreaming' over extra funding
Prime Minister Kevin Rudd says he will not bow to pressure from states to provide billions of dollars in extra funding.

Economists predict unemployment rate rise
The unemployment rate has jumped from 4.1 per cent to 4.3 per cent.

Market plunges 5pc, dollar crashes
The Australian share market plunged 5 per cent today, as the dollar hit a new five-year low. Fear of a global recession has seized markets, with big falls across the major indices overnight.

Associate Professor Steven Keen.
Steven Keen has come increasingly to prominence over the past couple of years specialising in the economics of Australia's spiralling household debt burden.

PROFESSOR STEVEN KEEN: Best case scenario is a recession more severe than 1990 and lasting one and a half times as long.

Worst case is something up to the level of the Great Depression which was 20 per cent unemployment and lasting up to a decade.

$50b Aussie wipe-out
Australian stocks wiped more than $50 billion off the value of the market today after the US House of Representatives rejected a $US700 billion ($860 billion) plan to rescue the financial system.

Upwardly immobile: mortgage stress bites
Reserve Bank statistics do not begin to tell the real story of housing stress in Sydney's western suburbs, according to financial counsellor Mike Young.

Households give up three years of gains
AUSTRALIAN households have been hit so hard this year that their financial gains of the past three years have been wiped out, a Reserve Bank report has found.

Economists predict unemployment rate rise

Official figures to be released today are expected to show the slowing economy pushed the unemployment rate up last month.

Economists are forecasting that the jobless rate jumped from 4.1 to 4.3 per cent in September, and that no new jobs were created.

ANZ economist Katie Dean says employment growth has been strong in the last six months, despite the slowing economy, but employers are now starting to scale back their hiring.

"Employment is normally one of the last indicators to turn around," she said.

"Generally firms are more than willing to hold on to their employees until they absolutely necessarily have to make job cuts.

"Certainly we could see that extended in this cycle given that the economy has been beset by skills shortages for so long.

"Employment growth in Australia has been very strong over the last six months or so, but the leading indicators do suggest that this growth or strong growth is not going to be sustained."

Ms Dean also says the financial crisis could add to unemployment.

"As the impact of the turmoil starts to flow through to some of those sectors which are more exposed, for example finance and insurance," she said.

In August, there was a surprising fall in the unemployment rate as employers continued to hire new staff.

Unemployment up to 4.3pc

The unemployment rate has jumped from 4.1 per cent to 4.3 per cent.

Official figures just released show the number of people in work in September also rose slightly by just over 2,000.

ANZ economist Katie Dean said earlier this morning employment growth has been strong in the last six months, despite the slowing economy, but employers are now starting to scale back their hiring.


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Associate Pofesor Steven Keen. Steven Keen has come increasingly to prominence over the past couple of years specialising in the economics of Australia's spiralling household debt burden.

PROFESSOR STEVEN KEEN: Best case scenario is a recession more severe than 1990 and lasting one and a half times as long.

Worst case is something up to the level of the Great Depression which was 20 per cent unemployment and lasting up to a decade.

Market plunges 5pc, dollar crashes

Australian shares closed down 5 per cent amidst global economic panic.

The Australian share market plunged 5 per cent today, as the dollar hit a new five-year low.

Fear of a global recession has seized markets, with big falls across the major indices overnight.

The Dow Jones Industrial Average plunged 5 per cent and today the local All Ordinaries index fell by the same margin. It was down 228.1 points at 4369.8.

After hitting a fresh three-year low, the ASX 200 closed 231 points lower at 4,388.

CommSec's Savanth Sebastian says there are growing concerns about the ability of emerging economies to withstand the financial crisis.

The fact that we saw the Indonesian market fall over 10 per cent and actually close trading for the day really had a significant impact on the rest of Asia," he said.

The miners have been hard hit, with Fortescue Metals Group down more than 14-per-cent.

The local currency, meanwhile, has dived more than three US cents in less than an hour to a five-year low.

About 4:45pm AEDT it was buying 67.65 US cents.

Asian markets suffer

Stocks around Asia have also suffered sharp falls.

Japanese share prices plunged 9.38 per cent, the biggest loss since the 1987 "Black Monday" crash, as panic-selling erupted over the global financial crisis.

Markets in Hong Kong, Singapore and South Korea were all down by about 5 per cent.

In Indonesia, a 10 per cent fall in share prices prompted officials to suspend market trading.

The main index in South-East Asia's largest economy nose-dived in response to sharp falls on Wall Street overnight before trading was suspended for an "indefinite period".

Indonesia's stock market was never suspended during 1997's Asian financial crisis.

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European, Asian Markets Plunge as Recession Fears Spread Worldwide


As stock indexes plunge across Europe and Asia, Britain unveiled plans today to inject up to 50 billion pounds—close to $90 billion—into its biggest retail banks. Recent efforts to bolster world credit markets have failed to stem fears that the spreading financial crisis could lead to a global recession. We go to Rome to speak economist Loretta Napoleoni, author of Rogue Economics: Capitalism’s New Reality.

Associate Pofesor Steven Keen.
Steven Keen has come increasingly to prominence over the past couple of years specialising in the economics of Australia's spiralling household debt burden.

PROFESSOR STEVEN KEEN: Best case scenario is a recession more severe than 1990 and lasting one and a half times as long.

Worst case is something up to the level of the Great Depression which was 20 per cent unemployment and lasting up to a decade.

$50b Aussie wipe-out
Australian stocks wiped more than $50 billion off the value of the market today after the US House of Representatives rejected a $US700 billion ($860 billion) plan to rescue the financial system.

Upwardly immobile: mortgage stress bites
Reserve Bank statistics do not begin to tell the real story of housing stress in Sydney's western suburbs, according to financial counsellor Mike Young.

Households give up three years of gains
AUSTRALIAN households have been hit so hard this year that their financial gains of the past three years have been wiped out, a Reserve Bank report has found.