Australian treasurer warns, unemployment to rise

I / Sydney October 12, 2009, 14:31 IST

Australia's economy will likely perform under capacity and unemployment will rise, despite the country's resilience in the face of the global downturn, Treasurer Wayne Swan said today.

Swan said the government's $63.18 billion emergency stimulus package had helped keep Australia out of a recession - the only major Western nation to do so - but that uncertainties remained.

"We still expect the economy will operate below capacity for a while yet and for the unemployment rate to continue to rise," he told economists at a lunch in Sydney.

"The full effects of the fall in Australia's terms of trade are also still being felt, and this will continue to weigh on domestic incomes. Private business investment and company profitability are still expected to decline."

Australia posted growth of 0.6 per cent in the three months to June - the best in the developed world - while the country's jobless rate fell unexpectedly for the first time in five months in September to 5.7 per cent.

But Swan, who did not put a figure on future unemployment, said without the government's fiscal stimulus the economy would have contracted by 1.3 per cent over the year  to June.

The treasurer said one year after the global financial crisis rattled markets around the world, a sustained global recovery was "no sure thing".