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Inflation a threat to the economy: Costello -

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(generated from captions) doesn't appear too concerned The Prime Minister

on the local share market about the impact at home. or about inflationary threats I don't think the inflationary fears in other parts of the world that some people have talked about

are present in Australia. were to go on rising, Clearly, if petrol

an inflationary effect over time, that might have it won't go on rising. but I am hopeful that the Treasurer, Peter Costello, But that's not the picture was painting today. posed by high fuel prices He listed the risk to inflation

to the Australian economy right now. as the greatest threat for business It can increase input costs

and it can have an effect in relation to inflation.

This is where we need to be vigilant here in Australia.

Mr Costello pointed to manufacturing competition with China as another major challenge for the Australian economy. The rise of China is changing world manufacturing, and I think that there is going to be a great place for Australian manufacturing,

but it's not going to be in low-value add-mass manufacturing. Mr Costello says while rising world oil prices and limited global refining capacity are beyond Australia's control, there are some domestic factors which can help to manage the risks to Australia's economy. And the Federal Treasurer cited industrial relations reform as chief among those factors,

signalling the Government is about to step up its campaign over its proposed IR changes. On the weekend, the government will be making an announcement in relation to further industrial relations reform. Industrial relations reform has the capacity to lift growth in the Australian economy in a way which will produce more jobs and better wage outcomes. However, he declined to go into any detail, saying only that the announcement will cover areas

the Government has already touted for reform. Well, the details of Australia's new industrial relations system will involve an Australian Fair Pay commission, it will involve minimum standards and conditions, it will involve increased flexibility.

The Federal Government has started briefing industry groups about the IR reforms. The National Farmers' Federation, which expressed initial concern over the legislation,

says it's been granted a 5-year transition period

to allow the sector to deal with the changes. More briefings are planned for the weekend. Rachel Carbonell, Lateline. Mudslides and widespread flooding in the wake of tropical storm Stan have left a trail of destruction across central America and southern Mexico. In one incident in the mountains of Guatemala, 55 bodies have been recovered after mudslides destroyed dozens of houses. With more than 130 confirmed deaths, the Guatemalan government has declared a state of emergency and is attempting to rush aid to devastated areas. In El Salvador, torrents of water flooded entire neighbourhoods and killed more than fifty 50 people in the capital San Salvador. And swollen rivers have broken their banks in the Chiapas region of southern Mexico, swamping homes and cutting off services. In total, more than 230 people have died and another 230,000 have been left homeless across the region. The Prime Minister says he won't sack Immigration Minister Amanda Vanstone,