Australia on brink of recession

THE unfolding economic nightmare will weigh heavily into the RBA's reasoning today on whether to slash rates.

Grim outlook ... the unfolding recession will weigh into the RBA's decision on whether to reduce rates. Picture: AFP.

RBA faces tough rates decision

THE latest economic data is expected to confirm an Australian recession, with Treasurer Wayne Swan warning of the impact of the US and Japan's savage downturn.

"There's no doubt there will be a dramatic impact on growth in the December quarter from what has occurred around the globe," Mr Swan said.

He said the Government was doing "everything possible" to cushion Australia from a global recession which had "got worse and worse" in December.

The US economy has suffered its worst contraction in 27 years, while Japan's economy is in freefall.

China's once staggering growth also is slowing.

The National Account figures, to be released tomorrow, are expected to show Australia's economy contracted in the final three months of 2008.

Westpac senior economist Andrew Hanlan said consumers and businesses were being more cautious with spending amid weakening global demand.

"We're looking for the economy to contract by about 0.2 per cent in the December quarter," Mr Hanlan said.

Worse still, the September quarter figures showing 0.1 per cent economic growth could be revised downwards.

A technical recession is widely defined as two consecutive quarters of negative growth.

The unfolding economic nightmare will weigh into the Reserve Bank of Australia's reasoning today when it decides whether to reduce official interest rates.

Most economists are tipping a 0.25 per cent cut.

Canberra is considering a range of options to rein in obscene executive pay.

The Opposition has renewed calls to allow shareholders to have a binding vote to block pay rises as community anger rages over the multimillion-dollar payouts to executives at Pacific Brands.

Shadow Treasurer Joe Hockey said that ultimately it was shareholders' money being paid to senior executives, so it should be their decision.

Finance Minister Lindsay Tanner said that while all options were on the table, such a move could throw up unintended results. "What happens if the shareholders vote down a package?" he asked.

 "How do you then enter into a negotiation with the CEO about what it should be? Do you hold a Dutch auction in a general meeting where you say 'I'm starting with a million and let's see how far we go down?'."

Deputy Prime Minister Julia Gillard said the Government was working with the Group of 20 Nations on ways to curb executive pay.