Global economy is fragile: Rudd

Steep falls across the world's stock markets underline the fragility of the global
economy and indicates Australia is not "out of the woods yet", Prime Minister Kevin
Rudd says.
The Australian share market suffered its worst sell-off in six weeks on Tuesday,
with the benchmark S&P/ASX200 index shedding 3.1 per cent amid a sea of red across
Asian markets.
The downturn came after the US S&P 500 had its worst day in two months on Monday,
plunging 3.06 per cent and dragging the UK's FTSE down 2.57 per cent.
"These falls underline the ongoing fragility of the global economy," Mr Rudd told
parliament.
"We are not out of the woods yet."
Mr Rudd said the stock market falls were being attributed to the downgrade of global
economic forecasts by the World Bank on Monday.
The World Bank expects global gross domestic product (GDP) to be 2.9 per cent, a
significant revision from a previous estimate of 1.7 per cent.
The major advanced economies are in deep recession, with the World Bank forecasting
the US to contract by three per cent in 2009, the Euro zone by 4.5 per cent and
Japan by 6.8 per cent.
He said share market falls were also caused by concerns over rising unemployment
around the world.
The White House on Monday said the US administration expected unemployment would
reach 10 per cent in the next few months, compared to a 25-year high of 9.4 per cent
in May.
With share price shifts like Tuesday's sell-off, it is little wonder that the number
of Australians playing the market had dropped sharply in the past two years.
Some 540,000 Australians had left the market by late 2008 compared with two years
earlier because of the global financial turmoil.
The latest Australian Share Ownership study by the Australian Stock Exchange showed
6.7 million people, or 41 per cent of adults, were still participating in the share
market.
The figure was down from 46 per cent when the study was last conducted in 2006, and
well off the 55 per cent peak in 2004.
Australia is just slightly behind the United States, where 45 per cent of households
invest in shares, but well above other countries.
"The decline in share ownership between 2006 and 2008 is also mirrored in declining
ownership of all other key types of investments over the same period," the ASX study
said.
"This suggests that volatile market conditions and a more pessimistic economic
outlook have impacted on people's propensity to invest."
Local shares were down across the board on Tuesday, and bank stocks were not helped
by a warning from global credit agency Moody's Investors Service.
It said the outlook for Australia's banking system was negative because of the
slowing of the global and local economies, but it still remained robust and one of
the world's strongest, having escaped most financial crisis-related losses.
Australian banks are facing rising credit costs and contracting loan volumes and the
performance of the country's businesses, rather than households, is likely to
determine their future performance, it said.
Moody's said it saw challenges for Asia's banks as a whole because of the severe and
protracted global recession.