Aussies looking at a big buying Christmas

By James Grubel  |   2008-12-9  |     NEWSPAPER EDITION

AUSTRALIA'S government began to hand out more than A$8 billion (US$5.2 billion) in cash to consumers ahead of Christmas but some analysts say the money may not be enough to stop the country sliding into recession.

The cash splurge comes after data showed the economy barely grew at all in the September quarter, when gross domestic product rose just 0.1 percent, its lowest pace in eight years, and with unemployment set to rise.

TD Securities senior strategist Joshua Williamson warned the spending may not be enough to lock in long-term growth. "As the package is a temporary measure, consumption growth in the December quarter from the package will unwind just as quickly in the first quarter of 2009."

The cash for families and pensioners is part of a A$10.4 billion economic stimulus package announced on October 14 aimed at boosting confidence and retail sales.

The payments will bring relief to consumers after the central bank slashed interest rates to a seven-year low last week and left the door open for more cuts.

"If the government doesn't empower consumers at a time like this, then in fact we will have even greater challenges ahead," Austrilian Prime Minister Kevin Rudd said.

Data showed last week that vehicle sales drove off a cliff in November as consumers shied away from big purchases, which, with the poor state of the housing market, points to a miserable fourth quarter.

A survey showed yesterday that Australian businesses cut back sharply on job advertisements in November as the global financial crisis intensified, pointing to an inevitable rise in the number of those out of a job and more rate cuts.

The survey from the Australia and New Zealand Banking Corp showed job advertising in newspapers sank 12 percent in November, after a similar drop the month before.