Shares slump 4%, NSW heads for $1bn deficit, New NZ Prime Minister plans economic fix: Economy roundup

Economic growth slowing, housing on the skids, business confidence at record lows – no wonder the Australian sharemarket has suffered a big fall this morning

Economic growth slowing, housing on the skids, business confidence at record lows – no wonder the Australian sharemarket has suffered a big fall this morning.

Investors turned bearish from the opening bell this morning, with the benchmark S&P/ASX200 index sliding 178.6 points or 4.35% to 3929.2 at 12.03pm AEST.

All the banks suffered, with NAB recording a 7.4% drop to $20.52, while Commonwealth took a 4.1% hit to $36.44. Financial services group AMP also dropped 3.4% to $5.34.

The Australian dollar has also fallen to $US66 cents after reaching $US67 cents early this morning.

The fall came as something of a surprise after a reasonably steady night on Wall Street. The Dow Jones Industrial Average also fell 73.27 points or 0.82% to 8870.54, despite news that shares in that car giant GM fell to their lowest level in 62 years.

Meanwhile, the NSW mini-budget has been revealed, and it doesn’t look good – a $1 billion deficit is expected, the largest in 15 years.

The deficit comes after large cuts have already been made, including shelving the North West Metro rail link, cuts to waste management services and a 12-month public service jobs freeze.

Despite the gloomy outlook, premier Nathan Rees says the state is plodding along. “The Australian economy and the NSW (economy) in particular, in the face of what’s going on elsewhere, are actually doing okay,” he says.

Overseas, New Zealand Prime Minister-elect John Key says his government will bring economic reform to the island nation.

Key’s plans include income tax cuts and redirecting government spending to infrastructure projects including roads and a high-speed internet network. He hopes this will dramatically reduce unemployment – currently at a five-year high – and help lift New Zealand out of its recession.

But new spending may be delayed by reports the national budget will slip into deficit by next June.

“Hopefully just a change of government will give some confidence to the economy, that we are going to put economic growth at the top of the agenda,” Key said on Radio New Zealand.