The global economic recovery remains fragile and stimulatory policies should stay in place until it is firmly established, says International Monetary Fund (IMF) managing director Dominique Strauss-Kahn.

Mr Strauss-Kahn made the comments in delivering the annual lecture of the Monetary Authority of Singapore on Friday.

“While I am hopeful that the global economy has turned the corner, the recovery remains fragile.

“Policymakers should therefore keep supportive measures in place until a recovery is firmly established and conditions for unemployment to recede are in place,” he said.

Crisis support policies may need to be wound back in some emerging markets, including some in Asia, where the recovery is “further along”.
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The federal government appears to be leaving the door open to cutting its stimulus spending ahead of what is likely to be improved economic figuring in its mid-year budget review later this year.

The federal opposition again on Tuesday accused the government of “reckless spending” that would put pressure on interest rates, while the author of Labor’s climate change review, Professor Ross Garnaut, called for an easing off in the stimulus program.

But Prime Minister Kevin Rudd said there was already flexibility in the measures.

“Our stimulus strategy already has built into it an acceleration and a de-acceleration,” Mr Rudd told reporters in Hobart on Tuesday.

“That’s the way in which it is planned.”
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Australians will begin repaying the $900 cheques from the Rudd government after the central bank raised the cash rate, the federal opposition says.

Shadow treasurer Joe Hockey said the Reserve Bank’s decision to raise the cash rate by 25 basis points to 3.25 per cent was a direct result of the federal government’s reckless spending.

He said the increase equated to an extra $1,000 in payments a year for a family who has a mortgage of $400,000.

“There goes the $900 cheque you received from the Rudd government,” Mr Hockey told reporters in Sydney.
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Having coerced the boss of the nation’s central bank into expressing his thoughts on the federal government’s stimulus measures, was anyone listening?

Opposition parties seem to have come away from the inquiry into how the government is spending taxpayers’ money propping up the economy with the same pre-conceived concerns that they had going into Monday’s hearing.

This is despite Reserve Bank of Australia (RBA) governor Glenn Stevens appearing relaxed about this whole stimulus business - not necessarily what the opposition wanted to hear.

Its argument is that given the surprising strength of the economy, interest rates will be higher and the debt burden more onerous than need be unless the spending is wound back.
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A Senate inquiry into the federal government’s $42 billion stimulus spending has only heard half the story due to the tactics of coalition senators, committee members say.

Treasury secretary Ken Henry was due to appear before a Senate Economics References Committee in Sydney on Monday soon after Reserve Bank governor Glenn Stevens.

His appearance has now been delayed until the next hearing, set for Canberra on October 9.

Committee chairman Alan Eggleston told the hearing that the delay was agreed to by committee members as Treasury had been unable to provide a written response to preliminary questions posed by the committee.
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Federal Treasurer Wayne Swan is holding firm to the government’s economic stimulus timetable as a Senate committee prepares to quiz the nation’s central bank governor about the state of economy.

“It would be foolish and irresponsible to drop our guard,” Mr Swan said in his weekly economic note, released on Sunday.

Reserve Bank governor Glenn Stevens is scheduled to appear before the Senate’s economic references committee in Sydney on Monday, two days before new data on retail trade, building approvals and house prices are released.

He will face questions about the way the government and the bank have responded to the global recession and its impact on Australia.
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Senators heard both sides of the economic divide at an inquiry on Monday to determine whether the federal government’s economic stimulus has worked and whether it should continue.

Quizzing several academic economists, the inquiry heard that the stimulus was a waste of money, that the recession was a normal part of the business cycle and should have been left for the free market to resolve.

It was also argued that the human tragedy would have been far worse without the billions of dollars stimulus, regardless of whether it results in higher interest rates and higher taxes.

Indeed, one economist believed more money should be spent on lifting the unemployment benefit to stimulate the economy further.
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An academic believes the federal government’s approach to tackling the global financial crisis has been a waste of money, and that the recession was part of the business cycle, a Senate inquiry has heard.

The Senate is hearing from a number of academics on Monday to examine the impact of the government’s series of stimulus measures since October 2008 and whether economic circumstances warrant changes to the initiatives.

Professor Steven Kates from the Royal Melbourne Institute of Technology (RMIT) backed the government’s measures to support the banking system, but said interest rates should have been lowered further and taxation lowered.

“But one thing you shouldn’t do, you should not have this blanket expenditure as a stimulus - four per cent of GDP (gross domestic product) is an unbelievable amount of money,” Prof Kates told the Senate Economics References Committee.
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The spending boost from the federal government’s stimulus package has ended, and retailers fear an upturn in interest rates will squeeze business over the next 18 months.

The Australian Bureau of Statistics released figures on Wednesday showing retail sales in July fell by 1 per cent.

The fall follows a 0.8 per cent drop in June and comes after the latest Access Economics forecast of a tough 18 months ahead for retailers.

Australian National Retailers Association (ANRA) chief executive Margy Osmond said the second consecutive fall in retail sales demonstrates government stimulus money has dried up.
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Premature withdrawal of economic stimulus could derail a global recovery, Australian Treasurer Wayne Swan has warned on the eve of the G20 finance ministers’ meeting in London.

Swan said the meeting of finance ministers from the G20 group of developed and developing nations on Friday and Saturday would discuss exit strategies for economic stimulus.

But none of the leaders he had spoken to recently indicated they believed the time was near to begin withdrawing that support.

“I do agree with others when they say that a premature withdrawal of stimulus could certainly stall recovery,” Swan told reports in London on Thursday.
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Treasurer Wayne Swan has indicated more changes could be made to the federal government’s fiscal stimulus strategy only days before key economic growth numbers are due.

While Australia is expected to avoid recession, homeowners are unlikely to be celebrating as signs of recovery put pressure on interest rates ahead of a monthly Reserve Bank of Australia (RBA) board meeting this week.

Labor’s $42 billion stimulus package is also expected to come under review on Wednesday when national accounts data for the June quarter is released.

The government has rejected opposition calls for the overall size of the stimulus package to be wound back but Mr Swan has indicated more tweaking could be done to the funding mix.
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The federal government says it has has no intention of winding back the ongoing rollout of its economic stimulus despite an upbeat assessment on the outlook by the Reserve Bank of Australia (RBA) chief last week.

RBA Governor Glenn Stevens said on Friday that Australia will be likely to suffer only a shallow recession and as the economy recovers, the central bank will lift interest rates to more normal levels.

“The Reserve Bank Governor’s comments were made with the impact of our economic stimulus factored in … he’s factoring in the delivery of the government’s stimulus package,” Deputy Prime Minister Julia Gillard told the Nine Network.
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The Rudd government is determined to maintain its stimulus programs after the central bank indicated for the second time this week that an interest rate rise is looking more likely.

The Reserve Bank of Australia (RBA) left the cash rate on hold in August at a 49-year low of three per cent, for the fourth month in a row.

But in announcing the decision on Tuesday, RBA governor Glenn Stevens said the risk of a recession had “abated”, and noted how economic conditions had improved.

The central bank went into more detail on Friday, predicting the Australian economy would grow by a half per cent in 2009.
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The forces driving monetary policy are evenly balanced at the moment, and look like staying that way for a while as the impact of monetary and fiscal stimulus plays out.

The position was summed up nicely in the minutes of the July 7 monetary policy meeting of the board of the Reserve Bank of Australia (RBA).

The minutes were released on Tuesday and laid out the positives and negatives facing policymakers.

In short, things are looking a little better but significant risks remain.

“Members began their discussion by focusing on the recent run of data, which provided further signs of stabilisation in the world economy,” the minutes said.
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The federal government is defending its economic stimulus package against reports cash payments to taxpayers have fallen short by nearly $1 billion.

The government planned to outlay about $20 billion in direct bonus payments as a way of bolstering the local economy’s defence to the global recession.

But $800 million has not found its way into the pockets of 270,000 taxpayers who failed to meet a June 30 deadline for lodging their annual tax return, an analysis by The Australian Financial Review reveals.

Competition Policy and Consumer Affairs Minister Craig Emerson says critics of the package can’t have it both ways.
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