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Investors look for light at end of tunnel -

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ELEANOR HALL: We begin with the economy where despair seems to be setting in about a prolonged and
deep world recession.

While the Australian share market was up three per cent in early trade, recovering half of
yesterday's losses, it was mirroring the wild ride in global stocks this week.

This afternoon in Sydney the Prime Minister will be meeting business leaders to discuss Australia's
response to the crisis.

But an indication of the growing concern about a recession here is the outlook for interest rates.
This month the central bank shocked everyone with its full one percentage point cut in rates. Now
the market is factoring in a further slashing of rates in the next few months.

With so many dire predictions of more pain ahead, investors are grasping at anything that might
point to an end point in this crisis.

Joining us now with the latest is business editor Peter Ryan.

So Peter it's been a week of dramatic government action right around the world as leaders grapple
with this financial chaos. The Australian share market was up today but can we read that as a sign
of investor confidence returning?

PETER RYAN: Well Eleanor it's only a sign that we remain hostage to any hint of optimism coming
from the United States. In fact investors in the United States and Europe don't seem to be reacting
with any renewed confidence that the global financial system can be eventually be resuscitated.

And the key indicator of this is the London interbank rate, or the LIBOR. That has only fallen
slightly this week, down a small but significant 25 basis points. But that's still two per cent
higher than this year's low set in March of two-and-a-half per cent against the US dollar.

So with credit markets still frozen over, the share market is in a global pattern - falling one day
on bad news and having a rally on less worse than expected news. And that will continue until
credit markets are repaired.

But in the meantime, the US consumer is hibernating. We've seen discretionary sectors like drinks,
snacks, computers and clothing and even Ebay recording its first loss.

So, so far investors, anyone with a super fund, there's one big question - when will the market
finally hit the floor and when will it be time to buy.

Tom Hougaard, who's chief market strategist at City Index in London says - don't hold your breath.

TOM HOUGAARD: Everywhere I look people are looking for a bottom. Everywhere I look I hear people
talking about valuations. And I think it's a very dangerous trend to begin to talk about that a
bottom is near because there is no, absolutely no guarantee that a bottom is anywhere near;
absolutely not a chance.

ELEANOR HALL: That's London economist Tom Hougaard.

Peter, as you said, investors are grabbing at any data they can and there'll be plenty around next
week, won't there?

PETER RYAN: Yes and it's interesting because normally next week would be a big event for inflation
data, but the inflation threat has now taken a back seat to the threat of a global downturn.

Nonetheless, there'll be a lot of scrutiny given that inflation is at 4.5 per cent, well outside
the Reserve Bank's comfort zone.

We have the Producer Price Index on Monday - that's inflation at the farm gate - and the September
quarter consumer price index is out on Wednesday.

But the really big events will be annual results for the National Australia Bank and the ANZ. The
relative CEOs John Stewart and Mike Smith will be quizzed on where they see the credit crisis
heading, especially now that the Government has guaranteed bank deposits.

There's also a speech by the Reserve Bank governor Glenn Stevens on Tuesday. Normally any change in
language would be scrutinised for hints. And that could actually hold signs on where interest rates
are heading.

ELEANOR HALL: Well we've seen that dramatic one percentage point cut from the reserve. What are
economists now saying about how much further rates will fall?

PETER RYAN: Well money markets are now pricing in a 75 basis point cut for November and another 75
basis point cut for December. The Reserve Bank doesn't meet in January but there's a chance of
another hefty cut in February.

If those predictions come to pass, the cash rate could, repeat could fall to 3.75 per cent by March
- that's more than two percentage points. Remember this is not good news but it's a sign of just
how deep a global recession might be.

Not everyone though thinks the cuts will be that dramatic, including Warren Hogan the head of
economics at the ANZ bank. He think thinks rates might fall to perhaps four per cent by the middle
of next year.

WARREN HOGAN: Yes the RBA needs to take interest rates down quite aggressively over the next six
months but not to the extent suggested by market pricing at the moment. Bear in mind that at the
low point in 2001, the interest rate in Australia got down to 4.25 per cent. Another low point in
1993 in the wake of the last recession, it got down to 4.75 per cent.

So the markets are pricing a multi-decade low for the RBA's cash rate which at this stage most
economists don't think is appropriate in the short term.

ELEANOR HALL: That's the ANZ's head of economics, Warren Hogan.

And Peter, the Prime Minister is meeting business leaders today. You've been talking to some of
those who'll be attending. What are they wanting from the Prime Minister today?

PETER RYAN: Well business leaders have been calling for details of the Government's $10.4-billion
stimulus plan rolled out earlier this week and the Federal Opposition isn't alone in wanting to
know more about the state of the economy and how the events in the United States and Europe can be
quarantined from here in any way.

Specifically business will want to know how they might need to adjust their strategies, capital
expenditure - basically the big challenges ahead.

But the big issue is the credit freeze and there's now evidence that projects are being shelved or
put on hold because finance is much harder or in some cases impossible to find.

And of course there's no escaping unemployment as a consequence of all this, even though Australian
unemployment is at a 30-year low. Expectations are being managed about how high the jobless number
might go as demand falls back locally; but also as China reduces its demand for commodities.

ELEANOR HALL: It's a worrying picture. Business editor Peter Ryan.