KEY POINTS:
Australians have rallied around Prime Minister Kevin Rudd amid growing warnings of a dramatic braking of the economy and huge job losses as the global financial crisis begins to bite.
Despite a continuing surge away from Labor in the states - confirmed at the weekend in the Australian
Capital Territory and in byelections in New South Wales - polls have shown the defences Rudd has erected against the crisis has bolstered his 11-month-old federal Government.
But even the series of cash handouts and billions of dollars committed for a vast, accelerated public works programme will not protect hundreds of thousands of workers, and the businesses that hire them, from the international financial tsunami.
Yesterday telecommunications giant Optus was reported to be preparing for hundreds of redundancies, following the 450 jobs cut last week by Ford, and an estimated 1500 jobs lost in the investment and finance sector.
The Government will reveal its new unemployment forecasts when it releases its mid-year economic review within the next month, and refuses to disclose its estimates before then.
"The Government in May made a prediction of 4.75 per cent [unemployment] by the June quarter next year," Deputy Prime Minister Julia Gillard told ABC radio. "We've said now expect unemployment to be higher than that."
The National Australia Bank's chief economist Alan Oster said the bank expected economic growth to slow to 1.25 per cent by the middle of next year, pushing an extra 200,000 people out of work. This was likely to hit retail sales in the run-up to the crucial Christmas shopping period.
There are also concerns that many pensioners, carers, low-income families and first-home buyers may choose to save payments and grants available under the A$10.4 billion economic package announced by Rudd last week, rather than spend the cash.
The Government is counting on the money being pumped back into the economy, helping to avert a dangerous slowing in economic activity.
Although too early for any real conclusions, the weekend's housing market remained subdued as prospective buyers resisted the temptation to use the A$14,000 grant each first-time buyer was offered for established properties, or the A$21,000 for new homes.
Rudd said the Government was worried by a steep slump in housing activity.
The Reserve Bank has been cutting interest rates and is expected to make at least one more before Christmas, while the ANZ and National Banks have further pruned their rates.
The ANZ reduced its rates by 0.25 per cent, and the NAB by 0.2 per cent - a reduction the bank pledged to extend beyond mortgages to agriculture and business.
So far Rudd is keeping the nation behind him. A special Morgan poll made last week as international stockmarkets launched into free-fall showed his status as preferred Prime Minister had risen more than 7 per cent in three weeks to 62.5 per cent, two-thirds of voters approved of the way he was handling his job, and the Government held a 15-point lead over the Opposition.
Yesterday a Nielsen poll in Fairfax newspapers found his approval rating had climbed 10 per cent to 71 per cent. Elsewhere, Labor's fortunes have taken a battering, with a surge in support for the Greens and a strong swing away from incumbent governments.