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sourcePrime Minister Kevin Rudd has warned economic conditions will worsen this year but is promising to take a "steely" approach to the fallout from the global financial crisis.
Fresh from a holiday, Mr Rudd returned to work on Monday with the economy on his mind.
He told an Australia Day reception at Kirribilli House that 2009 was going to be tough.
"Things will get worse before they get better," he said.
"The magnitude of the global financial crisis almost beggars belief."
He asked bosses to do everything they could to avoid sacking workers.
And he asked workers not to ask for big pay rises.
"We are all in this together: business, unions, governments, the community sector and every nation in the world."
The economic turmoil was the worst the world had seen since the Great Depression of 1931, Mr Rudd said.
He promised to be tough himself.
"We will (govern) with a combination of steely economic management and compassion for those who need support."
Mr Rudd blamed greed for the crisis.
"A culture of excessive risk taking - a culture of greed - a culture of excess has brought massive economic disruption to global financial markets and the global economy."
Those markets had been inadequately supervised and the world had to develop warning systems to prevent it all happening again, Mr Rudd said.
Opposition Leader Malcolm Turnbull says Mr Rudd must ensure any new economic stimulus package is focused on jobs and includes tax cuts.
He says Mr Rudd must note concerns about the initial fiscal stimulus package, including those raised by leading retailer Gerry Harvey, when deciding if a second round will be implemented.
In early December, the federal government delivered most of a $10.4 billion stimulus package that included one-off payments to families, pensioners and carers to boost spending in the lead-up to Christmas .
The full economic impact of the package is not yet known, but the Harvey Norman chairman said the effects of the cash handouts may have already worn off for the retail sector.
Speaking on ABC radio, Mr Harvey said he believed sales in December had risen due to the stimulus package, but that the boost was temporary.
"Now that I've looked at my first couple of weeks or three weeks (of) sales in January, they're not good," he said.
"My view is if there'd been no fiscal stimulus I don't think it would have been much different."
Mr Turnbull said Mr Harvey's remarks "underlined the importance of (an) additional round of stimulus being very carefully considered, very disciplined, and very very focused on jobs, jobs, jobs".
"Every element, every aspect of government policy must be directed on preserving and promoting employment," he told reporters in Sydney.
He urged the government to ensure a second stimulus package, if it went ahead, contained tax cuts.
"We know from international experience this will promote investment and jobs," he said.
Mr Turnbull also called on businesses to preserve jobs.
"Businesses should be very careful about laying off employees," he said.
"Virtually every business, large or small in Australia, has its best assets among its employees.
"Well-run companies, companies with leaders that have vision for the long term, will do everything they can to keep their team together. That will be their strategy.
"But if they are losing money, if they are in the red, it's very difficult to be able to afford to do that and that is why the government has to make sure that every dollar of taxpayers' money that it spends in fiscal stimulus measures is done so in a way that promotes employment."
In response to the economic forecasts, the Australian Council of Trade Unions says that a second package, targeted at jobs, is urgently needed.
"We have got to really target with stimulus those jobs you can bring on stream from day one," ACTU President Sharan Burrow told Fairfax Radio.
One option was to bring forward an "emergency energy retrofit" to deal with climate change.
"That then flows out to produce demand, to manufacturing, to services and the like."
Infrastructure upgrades at schools and hospitals should also be undertaken.
Ms Burrow urged employers to consider all options before laying off workers.
Stand-down days, where workers are paid 80 per cent of their wage to re-skill under government-funded programs, should be considered "so that when the economy picks up those employees are there ready to work with enhanced skills."
Forcing workers to take unused leave was another option, Ms Burrow said.
The ACTU estimates about 200,000 existing workers will be out of work this year.
Meanwhile, Australian business is preparing for the hard times ahead, as other countries head into a recession.
Australian Industry Group chief executive Heather Ridout says if the nation itself won't head into a recession in the near future, "it's going to feel like one".
Speaking on ABC radio, Ms Ridout said Australia was better placed than most other countries.
But she concedes the full impact of the economic conditions overseas won't be seen for the next six to 12 months.
"I fear we're not going to come out of this quickly, people say we're going to bounce back quickly well I think that's very optimistic."
When asked whether the federal government should provide another stimulus package before the May budget, Ms Ridout said the government needed to be very agile to respond to changing conditions.
"They shouldn't be locked into timetables around budgets or anything else in relation to what the economy needs.
"They've shown a willingness to act outside the normal parameters and they're going to need to be able to do that over the course of this year."
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