Economists sound recession warning

Economists have declared the non-farm economy is heading into recession after a National Australia Bank (NAB) monthly survey found business confidence is at a record low.

The NAB index dropped one point in November to a new low of negative-30 as forward orders fell to 1991 levels.

Confidence is down across all industries and all sectors apart from mining and transport are reporting their actual business conditions worsened last month.

NAB chief economist Alan Oster now says the total economy will contract this quarter.

"We wouldn't say there's a recession in the total economy, but it does look like the non-farm economy is probably going to be going into a moderate recession," he said.

NAB has also cut growth forecasts for next year which had predicted gross domestic product would expand by 1.3 per cent.

The bank is now expecting the economy to grow by just 0.5 per cent.

Earlier today Dun and Bradstreet released its survey of business expectations, which showed executives are expecting sales and profits to continue to worsen.

Nearly one in five executives surveyed expected to have fewer staff in the quarter ahead than they did a year ago.

Dun and Bradstreet's managing director Christine Christian says the drop in the Australian dollar has shaken business confidence.

"Very few businesses are planning to create new jobs in the coming quarter," she said.

"Most businesses are concerned at the flow-on effect the recent layoffs particularly by the finance sector and what impact that's going to have on the economy more generally."

Warning: Save your dollars because we're not going to hear about it on the 6 O'clock news but we're heading for a depression not just a recession. It is very predictable and the worst case could be something up to the level of the Great Depression which was 20 per cent unemployment and lasting up to a decade.

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PM urged to tackle homelessness

'Dead wrong' ... Mr Rudd has been urged to follow through on homelessness

Prime Minister Kevin Rudd is under pressure to make good on his promise to help the plight of the nation's homeless.

Mr Rudd put homelessness on the national agenda in January, announcing he was forming a committee to improve crisis services and help people get long-term housing.

He also told MPs to learn more about the plight of the homeless by spending a night in an emergency shelter.

"It is dead wrong that in a country as wealthy as ours that on any given night some 14,000 people are sleeping rough," he said at the time.

But Deb Tsorbaris from the coalition Australians for Ending Homelessness says the situation has deteriorated over the past year, and the global financial crisis is already biting the Australian community hard.

"We already know that in one of the last sets of data, the data that is collected from our services, that nearly 3,000 people had had mortgages before they appeared at our services," she said.

"That was at least a year ago, so we would expect those numbers to double or triple. Now that's frightening."

The coalition is in Canberra with a five-point plan to reduce homelessness and holds out hope that action can begin before the end of the year.

"Kevin Rudd has distinguished himself as the only prime minister, in my memory anyway, who has singled out homelessness as an issue that he wants to tackle," she said.

"We have had the white paper delayed. COAG is in a week and at that time there will be discussions between the states and the Commonwealth about huge amounts of money, in excess of $33 billion, and we are keen to make sure that a chunk of that goes to the area of homelessness."

The group's plan includes a proposal to build an additional 250,000 low-cost and community houses by 2020.

Federal Housing Minister Tanya Plibersek says she expects the issue will be raised at next Saturday's Council of Australian Governments (COAG) meeting.

"I think we are at, obviously, a very difficult time because of the global financial crisis, but the Government's early and decisive action with its $10.4 billion economic security strategy, I think, has certainly given a lot of people comfort and security and our actions on homelessness have been critical," she said.

"But we have got to ask ourselves, not just how the economic circumstances are affecting the number of homeless people, but how successful we are as a community and as governments working together to turn around some of these numbers."

Ms Plibersek says the Prime Minister's commitment to dealing with homelessness "has been full and unwavering".

Financial crisis no excuse for homeless neglect: Greens

The Greens say the Federal Government should not use the financial crisis as an excuse to water down its commitments to homeless people.

Greens Senator Scott Ludlum says the Government's rhetoric on homeless people has not been matched by action.

He says he is worried the Government will continue to stall and blame the financial crisis.

"It is something that's starting to colour the debate, if it's anything the Government's trying to put off or might be politically difficult it's certainly something being raised," he said.

"With due acknowledgment that the world economy is in serious trouble, people are still homeless right across Australia so I think it's time we saw some concrete action."

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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."

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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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.

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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.

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Freefall Friday: $84b - worst day in 21 years

ASX ... market plunges (Get Image)

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

Shares have slumped more than 5 per cent in the first half hour of trade.

About 10:30am AEST, the All Ordinaries index was down 229 points to 4,062, the lowest level in nearly three and a half years.

The ASX 200 lost 222 points to 4,092.

Earlier today it was tipped the local market would follow the United States down as Wall Street hit a new five-year low.

This morning the Dow Jones Industrial Average finished down 678 points, closing under the 8,600 mark.

The last time it dropped below 9,000 was in August 2003.

The Nasdaq slumped more than 5 per cent and the S&P 500 retreated 7.5 per cent.

Overnight, the Australian futures market plunged with the Share Price Index 200 ending down 4.2 per cent.

The Australian dollar also dipped against the greenback this morning after it rose above 71 US cents overnight.

It is now buying about 68.2 US cents.

Updated: 5:00 (AEST)

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.

The benchmark S&P/ASX-200 stock index recorded its biggest one-day loss in its 16-year history, dragging the value of the main share index below $1 trillion. The broader All Ordinaries recorded its worst day since the October 1987 crash.

- ASX-200 loses 8.3%
- Stocks plummet 16% for the week, worst since 1987
- Value of ASX200 falls below $1 trillion
- More than $680 billion wiped out in past year

The S&P/ASX200 ended down 8.3%, or 360.2 points, to 3960.7. The All Ordinaries lost 8.2%, or 351.9 points, to 3939.4.

The indices, both of which ended on their lows for the day, are at their weakest since May 2005.

The ASX200 lost almost 16% for the week, about three times the amount it lost in the week after the September 11 attacks in 2001.

In a day of dramatic plunges, the index lost more than $80 billion off its value, sinking below the $1 trillion mark. It has fallen more than $650 billion from its peak on November 1, 2007.

Across the board plunge

All sectors in the index fell more than 5%, with the energy sub-index plunging the most, losing almost 12%, as the oil price plummeted.

Financial companies lost 8.6%.

BHP Billiton shaved the most off the index, falling $2.10, or 7%, to $27.74. Rio Tinto fell $5.01, or 6.4%, to $73.00. Fortescue Metals Group dived 62 cents, or 19%, to $2.68. Concerns that China's slowing economy will cut its demands for commodities, including iron ore, have battered mining companies in recent days.

Only one company rose - Babcock & Brown Capital, which gained 2 cents, or 0.9%, to $2.35.

NAB fell $2.93, or 12%, to $20.80. The Commonwealth Bank shed $2.85, or 6.7%, to $39.55, ANZ lost $1.35, or 8.1%, to $15.30, Westpac fell $1.31, or 6.1%, to $20.19. Macquarie Group lost $2.98, or 9.5%, to $28.52.

Today's drop in the sharemarket seems to be led by the Nikkei, which was down as much as 11% at one point, said 4Cast Ltd's Michael Turner.

"Everyone has followed the Nikkei down," he said. "Everyone is fearful at the moment."

"And they get their money out of equities first thing."

"There's a bit of a crash happening," he said. "A lot of people's faith is being shaken."

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In the largest loss since the crash of 1987, the Dow Jones Industrial Average fell over seven percent on Thursday, closing below 9,000 for the first time in five years. Over the past six trading days, the Dow has plummeted over 2,200 points, or about 21 percent. Earlier today, global stock values fell in trading as fears grow of a worldwide recession.

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.

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
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