Market defies Swan’s gloom: Economy round-up

Australia’s sharemarkets are up strongly this morning as sentiment firms that the US Government will take action to prevent any sub-prime driven recession.

By 1pm the S&P/ASX200 has lifted 1.6% on yesterday’s close to 6609.1, while the Australian dollar is trading at US87.20c, up on yesterday’s US87.02c close.

This morning’s positive market vibe couldn’t contrast more strongly with the cautious picture Wayne Swan projected at his first major press conference as Treasurer yesterday.

Swan said yesterday’s annual account figures, which show Australia has grown at a rapid 4.3% over the past year, illustrate “the challenges we confront as a nation particularly in relation to capacity constraints and to wage pressures and the consequences for inflation”.

In comments that suggest a desire to dampen expectations of a big-spending first Labor budget, Swan emphasised the importance of directing government action towards keeping a lid on inflation.

“What the Government will do is take every step we possibly can to put downward pressure on inflation and downward pressure on interest rates. Tackling inflation is our number one priority and we have inherited inflationary pressures,” Swan said.

At the other end of the confidence spectrum is entrepreneur Gerry Harvey, who expressed a very positive view of the Australian economy in an interview with The Australian published today.

Harvey says the Reserve Bank of Australia could lift interest rates “four to eight times” without putting any serious dent in the economy. Harvey said that this “is the strongest period of growth and prosperity for such a long time”.