New stimulus package for US, market down after Babcock shares suspended, APEC says crisis could be over in 18 months: Economy roundup

The United States is set to receive another stimulus package which may reach $1 trillion, after president-elect Barack Obama signaled a proposal to create 2.5 million new jobs over two years.

The United States is set to receive another stimulus package which may reach $1 trillion, after president-elect Barack Obama signaled a proposal to create 2.5 million new jobs over two years.

Senior democrats have revealed they have held talks with Obama about increasing the $US61 billion plan already rejected by Congress and President Bush.

Obama plans to introduce a stimulus package as soon as he takes office on 20 January. The package will likely include tax cuts promised during the campaign, as well as funding assistance for infrastructure, education initiatives and assistance for the car industry.

“We are facing an economic crisis of historic proportions. We now risk falling into a deflationary spiral that could increase our massive debt even further,” Obama said in his weekly address.

Obama’s senior adviser David Axelrod said the package will likely be more than the $US175 billion proposed during the campaign.

”He wants a plan big enough to deal with the large challenges we face. And I think there’s a growing consensus across the spectrum among economists that we’re going to have to do something big,” he told the US’s ABC.

A formal announcement of the plan is expected to occur tomorrow.

Meanwhile, the Australian sharemarket opened 0.73% higher after Wall Street leads on Friday, following reports Obama has chosen New York Reserve chairman Timothy Geithner as treasury secretary.

But the market has since fallen after Babcock & Brown announced its shares would remain suspended. The benchmark S&P/ASX200 index was down 28.8 points or 0.84% to 3387.7 at 12.10 AEDT. The dollar has also fallen 0.63% to $US62 cents.

Westpac shares have fallen 3.1% to $15.84, while NAB also dropped 1.6% to $18.69. ANZ also slipped 2.2% to $13.06.

Meanwhile, world leaders attending the APEC summit in Peru have claimed the global financial crisis can be overcome by 2010.

“We are convinced that we can overcome this crisis in a period of 18 months. We have already taken urgent and extraordinary steps to stabilise our financial sectors and strengthen economic growth,” the leaders said in a statement.

The representatives of 21 countries have said they intend to resist pressures to protect industries, while maintaining the flow of credit for SMEs.