KEVIN RUDD has flagged more cuts in interest rates and further government spending to stimulate the economy, using an address to business leaders at the Asia-Pacific Economic Co-operation summit in Peru to step up his push for co-ordinated international action to save the world from a deep recession.
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The Prime Minister told corporate chief executives from APEC's 21 member countries yesterday that governments - both at home and abroad - needed to do more to take up the slack as economic activity in the private sector slowed sharply.
He warned that the forecast slowdown in the rate of growth in the world's poorer countries next year would push an extra 60 million people around the globe into poverty.
But echoing comments last week by the Reserve Bank governor Glenn Stevens, Mr Rudd called for more confidence about the economic outlook, saying that if governments took decisive action and pursued reforms they would "provide a rational basis for optimism for the future rather than simply contributing to the now thriving boutique industry of doom and gloom".
Continuing his hectic travel schedule, Mr Rudd flew into Peru's capital, Lima, early yesterday for the annual APEC gathering of regional political leaders which discusses economic, trade and investment issues.
As well as addressing business leaders, who included senior executives from General Motors, Microsoft and Chinalco, Mr Rudd spent his first day having a meeting with this year's APEC host, Peruvian President Alan Garcia, and a meeting and working dinner with New Zealand's new Prime Minister John Key.
Just as last year's APEC meeting shut down parts of central Sydney, significant areas of Lima, including the venues for the meetings and the hotels for visiting leaders such as American President George Bush, have been cordoned off, and security is intense.
But in most other respects Lima marks an obvious contrast to last year's APEC venue.
The security presence on the streets includes military personnel carrying submachine-guns.
Peru has experienced fast growth for the past two years but it is one of the poorest countries in APEC and lags behind APEC's only other South American member, Chile, in economic development.
In his speech to the corporate executives Mr Rudd said the global financial crisis was now having "a clear and immediate effect on the real economies of the world, real growth and real jobs around the world".
"As confidence across the world falls it begins a vicious cycle that leads to further caution on the part of households, leading to further falls in consumer spending, leading to further falls in business investment, leading to lower growth and fewer jobs generated," he said.
"As private demand falls governments must step in to take up the slack.
"This will require further monetary policy action and it will require fiscal action. It will require this action nationally, it will require this action internationally, and this action must be co-ordinated."
Monetary policy uses official interest rates to influence economic activity, while fiscal policy uses government taxing and spending.
