Rudd applauds US plan for toxic assets

The US government's latest plan to remove so-called toxic assets from the balance
sheets of American banks is dealing with the core problem of the global recession,
Prime Minister Kevin Rudd says.
Mr Rudd says the world economy will be one of the key issues when he meets President
Barack Obama on Tuesday, as it will be at next weekend's G20 leaders meeting in
London.
"If progress is achieved there and in London, then that's important for jobs in
Australia," Mr Rudd told reporters in Washington.
The share market gave the US plan the thumbs up, touching a two-month high initially.
The Australian dollar - a good barometer of investor confidence - jumped above 70 US
cents, its highest level since early January, as global investors felt more
comfortable taking on riskier assets.
The plan is aimed at helping the ailing US banking system recover from massive
losses suffered in the sub-prime meltdown and stabilise the economy.
The Public-Private Investment Program for Legacy Assets will be funded with
$US75-$US100 billion ($A106-$A140 billion) from the US government, and is expected
to bring in private investors to generate $US500 billion ($A709 billion) in
purchasing power and could expand to $US1 trillion ($A1.42 trillion).
US Treasury Secretary Timothy Geithner said the plan "will help banks clean up their
balance sheets" and thereby increase credit available to help revive the
recession-mired economy.
"This of course is important in the broader framework of acting on global bank
balance sheets that is necessary right across Europe as well," Mr Rudd said.
However, Commonwealth Securities chief economist Craig James warned investors not to
get too carried away.
"At face value all the world's problems have been solved virtually overnight. They
haven't," Mr James said.
"The good news is that the US government are getting serious with cleaning up its
banking mess. The bad news is that the workout process will take some time."
Still, the initiative comes at a time when the Rudd government has only just
conceded that the economy risks facing its first recession since the early 1990s.
Assistant Treasurer Chris Bowen went one step further than his bosses and actually
used the 'R' word.
While Mr Rudd said this week that it was "virtually impossible" for Australia to
sustain positive economic growth and Treasurer Wayne Swan agreed it was "virtually
impossible" to avoid a period of negative growth, neither actually uttered the word
recession.
"There are different definitions of recession. The technical definition is two
consecutive quarters of negative growth," Mr Bowen told the Super Radio Network.
"We haven't gone there - but we do have, we are seeing, a slowdown and the prime
minister has made it very clear, and I agree with him, of course, that avoiding
recession will be difficult."
The government was doing its "level best" to ensure economic and jobs growth were as
robust as possible.
"We have said all along this crisis will wash over Australia. It will have an
impact, but our job is to make the impact as small as we possibly can."
Mr Bowen said reports the government would have to ditch some of its budget
commitments because the current economic conditions were hurting the budget bottom
line were "a bit unusual".
"A lot of speculation in the media around this time of year is often misplaced," Mr
Bowen said.
He reaffirmed the government's commitment to long-term pension reform, and indicated
consideration was being given to paid maternity leave.