Obama builds support for massive stimulus package, shares up, British interest rates at record low: Economy roundup

President-elect Barack Obama may still be 11 days away from moving into the Oval Office, but he is already working hard to gather support for a massive stimulus package designed to spark the US economy.

President-elect Barack Obama may still be 11 days away from moving into the Oval Office, but he is already working hard to gather support for a massive stimulus package designed to spark the US economy.

In his latest speech on the package, Obama declined to put a price on the package, although most pundits expect it will cost at least $US1 trillion.

“I don’t believe it’s too late to change course, but it will be if we don’t take dramatic action as soon as possible,” he said.

But there is nervousness about Obama’s big plans, especially after reports that the US Government’s current 2009 fiscal budget deficit will triple to around $US1.2 trillion – and that’s before Obama has started spending.

Shares rise

A lack of specifics in Obama’s speech about stimulus plans disappointed US investors, and the Dow Jones Industrial Average fell 0.31% in overnight trade. Shares in retail giant Wal-Mart lost 7.5% after the company revealed a poor sales result in December, emphasising the poor state of US consumer confidence.

The Australian market started the day on a positive note, and the benchmark S&P500 index rose 0.7% or 25.1% to be at 3791.4 at 11:55 AEDST. Mining stocks have led the market higher, with BHP Billiton’s shares rising 2.2%.

Banking stocks were mostly steady, while West Australian conglomerate Wesfarmers gained around 2% in morning trade.

Bank of England cuts rates again

In another sign of the worsening outlook for economic growth in Europe, the Bank of England has cut official interest rates by 0.5% to a record low of 1.5%.

The BoE has now slashed rates by 3.5% since October as it tries to stimulate growth in the economy.

The sharp cuts underline the depth of the problems facing Brtiain – rates never fell below 2%, even during the Great Depression of the 1930s.