WORLD HAS WITNESSED PRECEDENT-SETTING DEVELOPMENTS TO PROTECT CHILD RIGHTS, BUT EMERGING CHALLENGES POSE NEW THREATS, THIRD COMMITTEE TOLD

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Despite positive and precedent-setting developments to protect the rights of the child, emerging challenges -- such as the changing nature of armed conflicts and the global financial, energy and food crises -- were posing new and challenging threats to children, the Third Committee (Social, Humanitarian and Cultural) was told today.



Opening the Committee’s discussion on the rights of children, the Special Representative of the Secretary-General for Children and Armed Conflict, Radhika Coomaraswamy, described the changing nature of warfare and its increasingly negative impact on children. Terrorism, which disproportionately targeted civilians, dominated the security discourse in many parts of the world, and both terrorist actions and counter-terrorism measures seriously violated the rights of the child.



Vulnerable civilian groups -- like women, children and the elderly -- were often the primary targets of terrorist attacks and, at times, were used by terrorist groups as a powerful weapon of war, she said. Counter-terrorism measures therefore also targeted those same groups, and more and more, children were being found in military detention, held without due judicial process.



Those emerging challenges were only exacerbated by other new and potentially serious threats, including natural disasters fuelled by climate change, rising food prices and, most recently, the financial crisis, said Saad Houry, the Deputy Executive Director of the United Nations Children’s Fund (UNICEF). To prevent lasting damage to the next generation, social services in health, education, nutrition and protection, on which children depended, would need to be preserved, in addition to efforts by Member States to mitigate the impact of the crises.



The representative of Barbados, speaking on behalf of the Caribbean Community (CARICOM), highlighted the combined impact of both new challenges and old -- such as poverty, HIV/AIDS, sexual exploitation and other forms of violence -- that threatened to derail the progress of many states and worsen the circumstances of those most at risk.



Many speakers noted that, in recent years, a number of mechanisms had been enacted to support the strengthening of children’s rights, and that now included a General Assembly resolution calling on the Secretary-General to appoint a Special Representative on violence against children. That position had not been filled, and many delegates expressed dismay over the slow progress in filling that position. The Director of the New York Office of the High Commissioner for Human Rights, Ngonlardje Mbaidjol, told the Committee that the Secretary-General had undertaken broad consultations with all relevant United Nations actors and was determined to fill that post without delay.



In addition, a monitoring and reporting mechanism on the use of child soldiers, established by the Security Council in 2005 in resolution 1612, had, so far, empowered United Nations staff to negotiate the release of child soldiers by five parties that had been identified as violators in Côte d’Ivoire, said Ms. Coomaraswamy. Similar action plans were being negotiated in Sudan, Sri Lanka, Myanmar and Uganda, she added.



Further, new mechanisms proposed to strengthen support for the rights of the child included the creation of a new Optional Protocol to the Convention on the Rights of the Child that would authorize the United Nations to review individual complaints. Yanghee Lee, Chairperson of the Committee on the Rights of the Child, the body charged with overseeing implementation of the Convention on child rights, said the Committee had given consideration to that idea, and looked forward to any discussion that might be initiated in that regard.



However, the representative of Mexico, speaking on behalf of the Rio Group, said that, despite the adoption by the international community of mechanisms, such as the Convention of the Rights of the Child and other international commitments to protect the rights of children, the reality was that children continued to suffer because of a lack of sufficient resources and the lack of political will to turn international commitments into action. She added her voice to the common call made by delegates to help build national capacity to respond to challenges and to provide the necessary resources for effective action.



Also speaking on the issue were the representatives of France (on behalf of the European Union), Qatar (on behalf of the Gulf Cooperation Council), Japan, Sudan, the United States and Colombia.



Earlier in the day, the Committee concluded its general discussion on the advancement of women, in which all speakers noted the close link between improving the lives of women and overall sustainable development. Delegates touched upon specific areas of concern for women, such as the situation of women living in the Occupied Palestinian Territory, the feminization of poverty, the effects of urbanization on women, cultural attitudes created by traditionally patriarchal systems, and ongoing issues related to sexual and gender-based violence.



Improving the socio-economic situation of women, especially in rural areas, and legislating gender equality were among the strategies proposed to help women meet the many challenges they faced.



Speaking on the advancement of women were the representatives of Israel, Bahrain, Myanmar, Zambia, Guatemala, Panama, Ethiopia, Norway, Argentina, Jordan, Tonga, the United Republic of Tanzania and Cameroon, as well as the Observer Mission of Palestine. The International Fund for Agricultural Development (IFAD) also spoke on the subject.



The Committee will meet again at 10 a.m. on Thursday, 18 October, to continue its discussion on the rights of the child.



Background



The Third Committee (Social, Humanitarian and Cultural) met today to conclude its discussion on the advancement of women (documents before the Committee on that topic are summarized in Press Release GA/SHC/3918), after which it will take up the promotion and protection of the rights of children.



New documents before it included the report of the Committee on the Rights of the Child (document A/63/41) at its forty-seventh session (14 January to 1 February). The report highlights issues regarding an Optional Protocol to the Convention on the Rights of the Child, relating to the sale of children, child prostitution and child pornography, which had entered into force on 18 January 2002. Notably, two unlawful activities had come under the Committee’s consideration in the context of that Optional Protocol: the use of children in camel racing and the recruitment of children for use in armed conflict. The Committee believed that both cases could be considered under that Optional Protocol, in the context of the provision on the sale of children for engagement in forced labour. While it may be argued that children may voluntarily join the army or enter into camel racing, the Committee took the position that, in most cases, the choice is made under threat or due to absence of opportunity, and had recommended the States parties involved take measures to prevent such acts from happening.



The report also discusses the need to avoid the criminalization and “double victimization” of children that are victims of offences covered by the Optional Protocol. Many States parties have difficulties with this issue, especially with respect to the treatment of children used in prostitution. In addition, the report discusses the issue of sex tourism involving children, which the Committee believes is directly connected to the offences covered by the Optional Protocol. According to the report, the Special Rapporteur on the sale of children, child prostitution and child pornography had worked to raise awareness of the issue, focusing, in the last two years, on demand for sexual services deriving from exploitation and on the sale of children’s organs.



Also in the report are General Comments Nos. 8, 9 and 10, relating to the rights of the child to protection from corporal punishment and other cruel or degrading forms of punishment; the rights of children with disabilities; and children’s rights in juvenile justice. General Comments are aimed at guiding States parties in understanding the provisions of the Convention.



The Committee also had before it a report of the Secretary-General on the status of the Convention on the Rights of the Child (document A/63/160), stating the number of States that had ratified and signed its Optional Protocols to date. An annex to the report contains a decision of the Committee on the Rights of the Child requesting approval, from the General Assembly at its sixty-third session, to work in two chambers.



Also before the Committee was a report of the Special Representative of the Secretary-General for Children and Armed Conflict (document A/63/227), which highlights progress on that issue since the mandate of the Special Representative was last renewed in 2006. Notably, the Office of the Special Representative submitted an amicus curiae to the International Criminal Court in relation to the trial of Thomas Lubanga, charged for the conscription of children under 15 while he was leader of the Union des patriotes congolais. The brief stressed the importance of interpreting the provisions of the Court on a case-by-case basis -- regarding enlistment, conscription, participation and use of children in conflict -- which would better protect all children associated with armed groups. Further, the Office helped prepare reports for examination by the Security Council Working Group on children and armed conflict, which had led to the trial of former Mai-Mai Commander Kyungu Mutanga, alias “Gedeon”, for recruiting children from the Katanga Province of the Democratic Republic of the Congo. It has engaged in dialogue to secure the release of children associated with fighting forces in the Central African Republic.



The report also discusses several emerging concerns, such as “terrorism” and subsequent anti-terrorism measures that target children, and the conscription of children as soldiers and to work in mines. Other concerns revolve around the reintegration of war-affected children into their communities, and the use of sexual violence as a weapon of war, to which children were increasingly falling victim. The report says that during the next mandate period, the Special Representative, subject to renewal, plans to strengthen international standards relating to impunity; address child protection issues with regard to peacekeeping and peacebuilding; strengthen partnerships with child-protection advocates; and advocate effective strategies for reintegration and “psycho-social healing”.



Also before the Committee was a report of the Secretary-General on the follow up to the special session of the General Assembly on children (document A/63/308), at which Governments committed themselves to improving children’s health, education and protection against abuse. With regard to health, the report says there have been important successes since the special session, which took place in 2002, including a significant reduction in child mortality for children below five years, mainly due to greater rates of immunization. Nevertheless, the proportion of fully immunized children in 2007 is far from the 2010 target of 90 per cent, with immunization coverage “plummeting” in some poor countries. Other obstacles to children’s survival are poor sanitation and the lack of safe drinking water.



On education, the report says that poor learning outcomes persist for children living in rural areas compared to cities, and for girls compared to boys. Many countries have limited capacity to provide education beyond the primary level. But, overall gains in primary level enrolment have been huge.



Regarding protection of children from abuse, the report says overall progress has been mixed, but adds that there was growing appreciation for improved legal and social welfare systems for addressing child labour, female genital mutilation/cutting and child conscription. The report cites some progress in the promulgation of laws against such practices, as well as through addressing social norms through better data collection.



Also before the Committee was a note by the Secretariat stating that General Assembly resolution 62/141 requested the Secretary-General to appoint a Special Representative on violence against children for a period of three years, and requested an annual report to the General Assembly, the Human Rights Council, and the Economic and Social Council. Pending appointment of the Special Representative, no report is being submitted to the sixty-third session (document A/63/203).



Statements on Advancement of Women



SANDRA SIMOVICH ( Israel) said that, despite intense efforts to promote the status of women within the country, the results were still mixed. For example, women earned only 83 per cent of men’s salaries, and the heavy representation of women in the public sector made them particularly vulnerable to Government cutbacks. Efforts towards equal representation in Government had also achieved uneven success and, currently, only 17 out of 120 members were women. In response to the shortfalls that still existed, the Knesset’s Committee on the Status of Women had been tasked with increasing women’s representation in Government and, overall, to achieving gender equality, socially, economically and politically.



Legislating equality and promoting equal representation in Government were effective, top-down strategies for achieving women’s rights, she continued. However, civil society could also take the lead in organizing education and representing women at the grass-roots level. In Israel, a vibrant non-governmental organization community had helped push forward the agenda of gender equality and had provided input on the legislative process, while supporting individuals by providing specialized education. She reminded the Committee that the Universal Declaration of Human Rights had explicitly addressed property rights issues, including that of owning land. Ensuring equal property rights for women could provide a direct route towards economic empowerment and, ultimately, a greater political voice for women. While some entrenched interests might feel threatened, equality was not a “zero-sum game” and societies and economies would benefit by having all their members contribute fully.*



MARAM ANWAR AL SALEH (Bahrain), aligning herself with the statement delivered by Qatar on behalf of the Gulf Cooperation Council, said the advancement of women was an issue of universal importance. For that reason, greater efforts must be made to strengthen the capacity of women to tackle the problems they faced. In Bahrain, programmes for the empowerment of women were based on Sharia principles, led by a council headed by the King’s wife. That council had drawn up a national plan to raise public awareness of the needs of women, and was creating a strategy to facilitate their full integration into society, including as active members of the electorate.



She said that Bahrain had been recognized for its work in the area of women’s advancement at the international level. A former President of the General Assembly, a Bahraini, was awarded a prize by the Peace Centre at the Vatican, among other awards. One area in which Bahrain was active was in the area of protection for victims of domestic violence, under the leadership of the Social Development Ministry and the Bahrain association against domestic violence. They had established shelters for battered women; organized workshops in partnership with the United Nations Population Fund (UNFPA) on how to draw up strategy to combat domestic violence; held seminars with members of the legal profession and in business, on ways to harmonize laws relating to women with Sharia principles; and others. In one such seminar, Morocco was being used as a case study for the eventual reform of Bahrain’s family code. Already, some work was being done on the possibility of awarding citizenship through the mother.



She added that, regarding social security, an amendment was made to the family code to provide for a pension fund, as well as to give women access to credit and vocational training. Indeed, all new programmes in the field of women’s rights were part of the Government’s efforts to bring Bahrain in line with international agreements, within the framework of the Sharia.



AYE AYE SOE ( Myanmar), aligning herself with the “Group of 77” developing countries and China, expressed the belief that integrated measures were needed at the national level to prevent and reduce violence against women. Empowering women necessarily involved improving the socio-economic situation of women in rural areas. In Myanmar, women enjoyed equal rights with their male counterparts, including in terms of traditional law. For instance, they had equal right to the ownership of property. The Myanmar Women’s Affairs Federation, a non-governmental organization with a membership of 2.6 million, implemented activities promoting women’s development based on guidelines set by the National Committee for Women Affairs. Other organizations, such as the Myanmar Maternal and Chid Welfare Association, the Myanmar Women Entrepreneurs Association and the Myanmar Women Sport Federation were also active in promoting the development of women.



With regard to social issues, such as the protection of women from sexual and gender-based violence, she said the Government was making sure that the socio-economic needs and priorities of women and girls were being addressed. The Government fully supported the zero-tolerance policy in terms of such violence. She further explained that 70 per cent of the Myanmar population resided in rural areas. For their benefit, the Government had laid down five rural development initiatives, focusing on the economy, transportation, health, education and safe water supply, with direct consequence for rural women.



She touched briefly on human trafficking, saying the country had provisions in its criminal code against trafficking in persons. In the first quarter of 2008, 239 trafficking cases were prosecuted and action had been taken against 637 offenders. Those convicted faced the possibility of life imprisonment.



WINNIE NATALA CHIBESAKUNDA (Zambia), aligning herself with the statements made on behalf of the Group of 77 developing countries and China and the Southern African Development Community (SADC), said that her country was fully committed to enhancing the empowerment of women and ensuring their active involvement in nation-building. As such, the Government had focused on five priority areas to support women: increasing their participation in the education system; reducing gender-based violence; preventing the transmission of HIV/AIDS; increasing their access to titled land; and capacity-building in gender analysis. Though the implementation of a number of measures had translated into positive results, many challenges remained. For example, many of the attitudes and beliefs of the patriarchal systems of society rated men superior to women, especially when it concerned equal participation in decision-making processes, the economy and access to education.



In response to that challenge, the Government had launched a “sensitization programme of traditional leadership” to encourage leaders to change the cultural and traditional practices that adversely affected women. Already, such efforts had helped to reduce the negative attitudes towards women. While Zambia had achieved progress in gender equality and equity, the country continued to face many challenges in meeting internationally agreed-upon goals, regarding issues such as maternal mortality and poverty levels. It was clear that the problems facing women were wide and varied and required concerted efforts by the entire international community. Zambia, like other developing countries, required financial assistance, technical assistance and support for capacity-building, in order to realize its goals relating to women.



CONNIE TARACENA SECAIRA ( Guatemala), aligning herself with the statements made on behalf of the Rio Group and the Group of 77 and China, expressed her concern over the lack of progress on achieving the Millennium Development Goals and the ongoing feminization of poverty at the global level. Nationally, the participation of Guatemalan women in public entities and institutions was visibly increasing. In addition, over the past five years, the number of organizations created specifically by or for women had increased substantially. A series of legislative reforms had been initiated and were aimed at eliminating all forms of violence against women. Those reforms provided support to the victims of violence and greater punishments for the perpetrators of those crimes against women. Women in Guatemala were guaranteed a life free of violence; in family life, social life, and in the spheres of education and religion, as well.



However, Guatemala was still far from reaching its goals to protect, promote, and increase the rights of women and girls, she said. Support from partners for national efforts was vital, and would help both individual countries and the international community at large. Gender equality and the empowerment of women in development were essential for sustained development and for all efforts to end poverty, disease and hunger worldwide. For developing countries to comply with gender equality commitments, it would be necessary for them to be provided with more resources. Efforts to strengthen national entities and capacity-building were, therefore, warmly welcomed. Touching briefly on upcoming celebrations of the International Day for the Elimination of Violence Against Women on 25 November, she expressed her delegation’s hope that those celebrations would inspire the global community, and men in particular, to end all acts and forms of violence against women.*



MARY MORGAN-MOSS (Panama), aligning herself with the Group of 77 and China and the Rio Group, said her Government’s steadfast support for the advancement of women had begun to bear fruit, notably in the areas of health, and the protection of women and girls from violence. Regarding the issue of protection, she said the Government was carrying out a public awareness campaign on domestic violence with the motto “If you hit one, you hit us all.” As part of that campaign, the Government had arranged an event where five women -- who appeared to have come from happy homes -- appeared before a crowd with visible scars on their faces. Their stories elicited passionate reactions from the crowd, who were appalled that their assaulters were going unpunished. That event had been one of many undertaken as part of the International Day of non-violence against women. The penal code had recently been strengthened, so that domestic violence was punishable by up to 30 years in prison. It was hoped that all Member States would comply with the General Assembly resolutions, and begin collecting sex-aggregated and gender-sensitive data, so as to help policymakers craft appropriate measures to combat violence against women.



Describing the situation of women with regard to Panama’s social development, she said growing urbanization was causing an inordinate amount of population pressure on cities. The 2000 census had indicated that nearly one third of breadwinners in cities were women, indicating that some of those pressures were being borne by women. In addition, the spread of AIDS through heterosexual activity affected women greatly, as did other forms of sexually transmitted diseases. The Ministry of Health was seeking to speed up its fulfilment of health obligations to women, in line with the Millennium Development Goals. Guidelines were being drawn on ways to improve the rate of maternal mortality, while also improving women’s access to birth control. The Government sought to eventually provide a full range of health services for women, for every stage of their lives, including during times of pregnancy and birth, as well as those times beyond their reproductive life, taking account of the various sociocultural aspects regarding the question of women’s health. Programmes already in place were carefully monitored and formed part of Panama’s holistic conceptualization of sexual health issues.



WOINSHET TADESSE ( Ethiopia) said the empowerment of women and gender mainstreaming was “very critical” for achieving internationally agreed-upon development goals. But, due to power imbalances, structural inequalities and the absence or inadequacies of penal legislation to deter abusers, violence against women was rampant worldwide. Concurring with the United Nations Secretary-General’s recommendation to take a comprehensive approach to prevent and eliminate that vicious human rights violation, she recognized the crucial importance of engaging in activities aimed at improving the situation of Ethiopian women.



Ethiopia had undertaken several policy and legislative measures to curb all forms of discrimination against women, with a strong emphasis on women’s participation in the development process, she continued. The Federal Constitution recognized women’s equal rights and full legal rights to participate in the country’s political and economic spheres, including in decision-making processes. The Government and other relevant actors had used awareness-creation, advocacy and lobbying activities that had resulted in an increase in the number of women in decision-making and leadership positions, she said, noting that 117 women had been elected to parliament, and women held a number of ministerial positions.



She added that the current health policy paid special attention to family needs, educational sector efforts had boosted the enrolment and retention rates of girls and women, and the Family Law had been revised to ensure equal rights of inheritance, divorce and child custody. The revised Penal Code now attached 10 to 15 year sentences to perpetrators of the crimes of rape and abduction. She said the coordination and strategic partnerships within the United Nations system were “critical to the success of the whole agenda” of gender equality. She called on development partners to support multifaceted efforts under way in that field, by increasing financial and technical assistance needed to translate shared goals into real actions.



LARS SIGURD VALVATNE ( Norway) said that women represented half the talent, half the market and, when included in decision-making, a better “bottom line”. No nation could, thus, afford to ignore such a large part of the workforce. Norway had recently launched two domestic policy initiatives to promote gender equality. The first required State-owned companies, and certain public companies listed on the Norwegian Stock Exchange, to ensure that women constituted at least 40 per cent of the members on their respective boards of directors. The second initiative focused on fathers and provided them with greater incentives, like parental leave, to spend more time at home. Such efforts were aimed at encouraging mothers not to abandon their careers while caring for children.



On gender mainstreaming, he noted that the reports before the Committee showed that, at best, there had been modest progress. Indeed, member proposals for the upcoming meeting of States Parties to the Convention on the Rights of Persons with Disabilities currently showed that only six women had been proposed as members, compared to 13 men. He, therefore, encouraged the Committee to ensure that, when the 12 members were finally elected, there would be a 50-50 gender balance.



MARÍA LUZ MELON (Argentina), aligning herself with the Group of 77 and China and the Rio Group, said the question of women must be considered in all its aspects, including from the point of view of human rights and social development. It was also important to consider the importance of women’s active participation in a nation’s political, social, cultural and economic life. For its part, Argentina had recently promulgated a law on trafficking, as part of its initiative to guarantee the protection of women. Argentina believed that international forums should remain seized of the question of the elimination of all forms of violence against women, including on the part of the countries of the Americas, within the framework of the Inter-American Convention of Belem do Para and its follow-up mechanism.



She said the National Council of Women in Argentina had embarked on a training programme to sensitize the public on the ills brought on society by violence against women. In addition, a special programme on sexual violence provided assistance to victims, be they adults or children. She added that countries of the Southern Common Market (MERCOSUR) had agreed to harmonize their strategies for combating violence against women.



She added that maternal mortality was one of the country’s priority areas. Its national programme on sexual health and responsible procreation acknowledged the right to health. At the same time, it provided for everyone’s right to adequate, reversible, non-abortive and temporary birth control methods.



NADYA RIFAAT RASHEED, observer for Palestine, aligning herself with the statement made on behalf of the Group of 77 and China, said that women must be allowed to enjoy their full fundamental human rights, since a denial of those rights would not only limit opportunities for women but would also handicap the development of societies. One of the most tragic human rights situations for women was occurring in the occupied Palestinian territories, including East Jerusalem. Occupation compounded the pressures and constraints that already existed within societies in regards to the advancement of women. Like all other women, Palestinian women fought gender inequalities and discrimination within their own society. However, 41 years of occupation, and the ills that had accompanied it, remained the major obstacle to their social, economic and political advancement.



For example, the increase of restrictions on the movement of Palestinians within the occupied territories had forced 69 women to give birth at Israeli checkpoints since 2000, she said. Thirty-five of those women had miscarried, and many more pregnant women in the territories had died due to inadequate medical care. Indeed, lack of proper medical care during pregnancy was the third highest cause of mortality among Palestinian women of reproductive age in the Occupied Territories. Occupation had also placed the Palestinian economy in a disastrous state, and poverty and unemployment within the occupied territories was rampant. Urgent attention and assistance must, thus, be given to Palestinians living under occupation and, in particular, to women and their children. The international community must demand that Israel, as the occupying power, abide by its obligations under international humanitarian law towards the civilian population in the occupied territories, especially in Gaza. In spite of all the challenges they faced, Palestinian women continued to be resilient in their quest for peace, since only then would they be able to make real progress towards securing a promising future.



SAMAR AL-ZIBDEH (Jordan), aligning herself with the Group of 77 and China, said her Government supported the protection of women and eliminating violence against them. Women in Jordan were politically, socially and economically empowered, and played an active role within the cabinet, Parliament, Senate and various judicial bodies. Several female ambassadors represented the country abroad. A quarter of municipal council members were women. She said Jordan’s laws were gender sensitive -- whether relating to political parties, publishing, corruption, money-laundering, disabled persons or other subjects. Twenty per cent of elected posts at the municipal level were currently set aside for women, and the Government was considering extending that quota to the entire civil service.



Regarding economic programmes that benefit women, she said laws were being amended to grant women more rights in the realm of business, and to extend legal protection to all workers without exception. Jordan saw a marked increase in access to credit for small enterprises, through a bank dedicated to that cause. Women benefited most from those opportunities, bringing a direct benefit to their families. However, unemployment was still a problem and, for that reason, the Government was investing in the economy in an effort to create jobs for women. Training was also being provided through the National Council of Vocational Training.



On violence against women, she said Parliament had recently passed a family protection law, which affords protection to women from domestic violence. The National Council for Family Affairs, working in cooperation with the “family protection project”, was working to create a national framework to tackle family violence. A Government “family reconciliation programme” provided shelter to domestic abuse victims. At the same time, the public security directorate had initiated a rehabilitation programme for female convicts, and was educating church and mosque officials on the importance of prisoner reintegration. The national committee in charge of women’s affairs was presided over by the King’s daughter and was currently preparing a women’s empowerment campaign. One of its aims was to encourage relevant ministries and other government bodies to adopt a gender perspective, so that remaining challenges -- with regard to poverty eradication and sexual discrimination, among others --could be better tackled.



FEKITAMOELOA ‘UTOIKAMANU ( Tonga) said research had shown that advancement of women in education stimulated economic growth and poverty reduction, and reduced malnutrition and child mortality. As two thirds of the world’s 1.2 billion people living in extreme poverty were women, it was vital that women be given the equal opportunity and access to education and vocational training to ensure that future generations had a chance to break the vicious cycle of extreme poverty. Globally, the percentage of women and girls living with HIV and AIDS had increased from 41 per cent in 1997 to almost 50 per cent. Because the loss of productivity and the medical expenses put women living with HIV and AIDS, and their families, in a vicious circle of extreme poverty, a proactive approach to the prevention of, and education on, HIV and AIDS must be continued.



She said environmental sustainability was strongly linked with gender empowerment. Food and water security was crucial to the prosperity of women. Since women in developing countries were the predominant force behind agricultural production and water procurement, the rapid increase in price for basic commodities and the increasing scarcity of water placed tremendous pressure on them. Special attention had been given to gender equality during the debate on system-wide coherence. The gender perspective must be integrated and mainstreamed within the United Nations agencies, particularly those agencies that were fundamental to sustainable development. As there was a risk that, because of the current financial crisis, the financing of core development programmes might be downgraded, she urged donors to refrain from taking short-term actions that would undermine the achievement of long-term benefits.



MARYAM JOY MWAFFISI (United Republic of Tanzania), aligning herself with the statements of the Group of 77 and China and SADC, said her Government had ratified national and regional instruments that aimed at promoting and protecting the rights of women, and worked tirelessly to meet those instruments’ commitments. Gender equality and women’s empowerment were central to her nation’s development agenda and the reason why the Government had continued its efforts for gender mainstreaming. The already established gender machinery and the gender focal points in ministries, as well as local government administration, had been pivotal in that regard. There were, however, inadequate gender-disaggregated data, in particular for reporting and monitoring purposes.



She said gender-based violence was, apart from being a violation of women’s human rights, a barrier to the achievement of gender equality and development. The national “Say NO to Violence against Women” campaign, launched in May, aimed at sensitizing the community and engaging it in the implementation of the National Plan of Action to end violence against women by 2015. The Government had put in place the Anti-Trafficking in Persons Act, aimed at combating and preventing trafficking in human beings and providing compensation to the injured victims. Another of her Government’s concerns was the issue of maternal health, one of the Millennium Development Goals that were off track. Women had a right to get through pregnancy and childbirth safely, but the lack of access to health centres with qualified midwives was still a serious impediment to maternal health.



CÉCILE MBALLA EYENGA ( Cameroon) said biological, psychological, cultural and judicial stereotypes all perpetuated discrimination against women and reduced them to “second-class citizens” within their own societies. Women and girls made up the majority of the world’s poor and their vulnerability to poverty was often the result of a lack of access to such areas as education, property and within decision-making processes. International, regional and national efforts should be pooled to give women back their dignity and allow them to contribute to overall developments and improvements in their societies.



At a national level, Cameroon’s women were considered vital actors in development and were, thus, fully integrated into the national development strategy, she said. Thanks to the support of bilateral and multilateral partners, real progress had already been achieved. Gender issues were being specifically targeted now in all national efforts to realize the Millennium Goals. Education was the keystone to promoting women in Cameroon, and improving women’s access to education was a top national priority. To ensure sustainable progress, development partners should fulfill the commitments made in previous international forums to assist countries like Cameroon in achieving their development goals and reducing the vulnerability of women and children.



XENIA VON LILIEN, of the International Fund for Agricultural Development (IFAD), said women were the hardest hit by the current food crisis, which was caused, among other things, by the failure of productivity to keep pace with growing demand due to population growth, rising incomes and urbanization. “Women feed the world,” she said. In many parts of the world, women were the main farmers and producers. There was, however, a deep gulf between the world’s reliance on food produced by women and the things women needed to grow and market that food, such as land, tools, seeds, information, credit and market access. The Comprehensive Framework for Action to boost agricultural productivity and improve food security needed to include specific steps to recognize, understand and address the barriers created by gender roles, and must better integrate women in the agricultural production value chains.



She said that, on the occasion of the first observance of the International Day of Rural Women, IFAD, the Food and Agriculture Organization (FAO), the World Bank and other partners had launched the Gender in Agriculture Sourcebook, which provided an up-to-date understanding of gender issues in agriculture, ranging from water, land and markets to natural resource management, infrastructure and governance. In the course of 2008, IFAD had enhanced its support of women in leadership positions in farmer’s organizations. IFAD had also supported the role of women in decision-making at higher levels. It had launched the Network of Women Agriculture Ministers and Leaders, which had met for the first time in May, in New York.



Debate on Rights of Children



RADHIKA COOMARASWAMY, Special Representative of the Secretary-General for Children and Armed Conflict, said that, though the general picture with regard to children and armed conflict continued to be bleak, there had been a number of positive and precedent-setting developments. Among the most significant was the passage of Security Council resolution 1612, which implemented a monitoring and reporting mechanism with regard to the recruitment and use of children as child soldiers. Armed with that resolution, United Nations Children’s Fund (UNICEF) staff, and other United Nations child-protection advisors, had begun to negotiate action plans with groups that recruited and used children.



In Côte d’Ivoire, all five parties that had been identified as violators had negotiated action plans and released children, she said. Similar action plans were being negotiated in Sudan, Sri Lanka, Myanmar and Uganda. Nevertheless, there remained 16 persistent violators who continued to recruit and use children, and Member States should set up a mechanism for determining targeted measures against those offenders. Those efforts, and the end of wars in Liberia, Nepal and Sierra Leone, were leading experts to suggest that the total number of child soldiers in the world had decreased, and there was a possibility that it would be further reduced in the near future. In addition, for the first time, there was an international prosecution on the recruitment and use of child soldiers, as the Office of the Special Representative had filed an amicus curiae with the International Criminal Court in the case of Thomas Lubanga, the former leader of the Union des patriotes congolais.



There was far less progress with regards to the other grave violations against children, such as killing, maiming, sexual violence, abduction, denial of humanitarian access, and attacks on schools and hospitals, she said. Moreover, sexual violence against girls and boys continued to be a heinous consequence of war. Her office had been working to raise awareness of those issues and the overall situation of children and armed conflict among stakeholders and the general public, in addition to mainstreaming the issue within the United Nations system. Children and armed conflict should be an integral part of peacemaking, peacekeeping and peacebuilding, and due in part to the efforts of her Office, a greater number of peace agreements had child protection provisions and demobilisation programmes that were sensitive to the needs of children.



Despite that progress, serious challenges remained, she said. One of those challenges was the ongoing fight against impunity and the need to end grave violations against children. There was now the legal architecture to do that, before both the International Criminal Court and the Security Council. In addition, it was important to build national capacity to deal with those issues. Already, in some countries, the recruitment and use of children was being criminalized, and sexual violence against children was being prosecuted. Those efforts should be further encouraged with technical support and resources.



The main challenge facing children and armed conflict lay in the changing nature of warfare, where civilian life was far less protected, she said. Recent visits to Iraq, Afghanistan, Israel and the occupied Palestinian territories had shown that those countries, as in many others, faced what had been termed a “terrorist problem”, where insurgent groups mobilized children in their political and military activities and, at times, used them as child suicide bombers. Some groups attacked schools where children studied and were particularly brutal with regard to female students. In response to those developments and insurgencies, children were now being found in military detention, held without due judicial process. As well, there was an increased use of aerial bombardments and precision bombing, where collateral damage was an increasing factor and children were often innocent victims. The fundamental principles of international humanitarian law --the separation of civilian from combatant and the rule of proportionality -- were often breached and Member States must, therefore, make it clear that the rules of engagement, as defined by international law, must be implemented.



Creating innovative and successful programmes for the care and protection of children in those situations was another challenge, she said. Rescuing children was a laudable goal, but the real struggle was in the successful reintegration of those children back into their communities. Any attempt at reintegration must involve inclusive community-based programming and the family. For those efforts, child protection agencies and non-governmental organizations needed adequate resources, she continued. Though Governments and donors were willing to fund emergency relief, they were not always willing to “stay the course” to ensure that children were effectively reintegrated. Donors and Governments should be sensitized to the negative consequences of unsuccessful reintegration, as many former child soldiers might return to a life of violence or crime.



The achievement of the Millennium Development Goals was particularly difficult in situations of armed conflict, she said. More than two thirds of children under five who were undernourished lived in countries with conflict, and more than two thirds of the children out of primary school also lived in armed conflict situations. Those sobering figures should propel the international community to devise programmes and projects to ensure that the basic human rights of children were protected, and the concept of “emergency” included the provision of basic health, nutrition and educational services.



She closed with the story of a young girl, from the Central African Republic, who had been picked up by the leader of a local criminal gang. When the girl was later returned home, she refused to speak. “Discriminated by her parents, abducted by armed men and possibly violated, she now faces a bleak future,” said Ms. Coomaraswamy. Because of a lack of attention on the part of the donor community, she barely had shelter, had no schooling and little respite from the violence. Unless Member States, the United Nations and non-governmental organizations redoubled their efforts and ensured that the moral imperative to protect children continued to override all political considerations, children like that young girl would never have a future.



SAAD HOURY, Deputy Executive Director of the United Nations Children’s Fund (UNICEF), delivering a statement on the promotion and protection of the rights of children, first addressed the issue of child rights. He lauded the entry into force of the Convention on the Rights of Persons with Disabilities, saying it reinforced and complemented the provisions of the Convention on the Rights of the Child, since children with disabilities faced additional vulnerabilities. States parties were urged to place children with disabilities high on their agendas, since such children were “overrepresented” among those who “made their way through life impoverished, deprived of family care, without access to school, discriminated against and vulnerable”.



He said it was crucial that government, civil society, and international human rights and development actors participate in the Convention’s international monitoring mechanism. UNICEF was ready to play its role in that process through: advocacy and public education on the Convention; assistance with the review of national legislation and policies as they impact on children; and support to improving the availability of data on the situation of children with disabilities. UNICEF also celebrated the “historic” adoption of the Declaration on the Rights of Indigenous Peoples by the General Assembly last September. Used together with the Convention on the Rights of the Child, the Declaration would bring strength to the overall promotion and protection of the rights of indigenous children.



In light of the global crises that had accelerated in the past year, he urged Member States to take all measures to mitigate the impact of those crises to “ensure a first call for children”. To prevent lasting damage to the next generation, social services in health, education, nutrition and protection, on which children depended, must be preserved.



He noted that significant advance had been made to ensure the protection of children exposed to armed conflict. For instance, the Forum on the implementation of the Paris Commitments and Paris Principles in September had showed strong support from an increasing number of Member States for the cause. In addition, Security Council resolution 1612 had provided the opportunity for many agencies to work collectively in addressing grave violations against children. It offered a new platform of engagement with countries, with increasing ownership and engagement of national authorities on the implementation of the monitoring systems. UNICEF recognized the work of the Special Representative for Children and Armed Conflict in that area.



He then touched on the issues of child labour and the sexual exploitation of children. Child labour was the cause, as well as consequence, of poverty, with one in 12 children subject to the worst forms of child labour: they were soldiers, miners, machinists or were exploited in the sex industry. “Those forms of child labour represented today’s version of slavery,” he said, and was hazardous, oppressive, damaged children’s health and threatened their safety. They robbed children of a childhood, education and a future.



He said eliminating child labour could not be done “by waving a magic wand”, because there were systemic, structural problems enmeshed in global economic systems that could not be addressed in isolation. The five-yearly International Conference of Labour Statisticians was expected to review the definition of child labour later in the year, providing Governments the opportunity to re-evaluate the impact of child labour on their economies and their people. The inclusion of household chores in that definition would finally recognize the work of girls -- a step that would make gender inequality more visible.



On sexual exploitation, he pointed to the upcoming World Congress against the Sexual Exploitation of Children and Adolescents in Brazil in November. He noted that legislative improvements on that topic had not been matched by progress in the application of the law, or by prevention efforts and the provision of services and care for child survivors. It was time to take stock and set out goals and recommendations for the future.



In addition, he said the United Nations had the opportunity to advance the rights of some of the world’s most vulnerable children: those living without the protection and care of their families. Last year’s omnibus child rights resolution, which welcomed ongoing processes aimed at elaborating a set of United Nations guidelines for the appropriate use and conditions for alternative care for children, had been advanced further with the help of the Human Rights Council. UNICEF encouraged Member States to continue that process, leading to the finalization and adoption of the Guidelines.



He ended by addressing the issue of follow-up to commitments to the “World Fit for Children”. The number of deaths due to measles had fallen since last year, and malaria prevention measures had been expanded, with increases in the use of insecticide-treated nets among children under five years. Estimated numbers of child deaths had fallen worldwide; net primary school enrolment was at least 90 per cent in all but two regions; and an estimated 198,000 HIV-positive children were receiving antiretroviral treatment as of December 2007, representing a 2.6-fold increase since 2005. Yet, much remained to be done, because evidence showed that the world was not moving fast enough to achieve its Millennium Development Goals relating to children’s health.



NGONLARDJE MBAIDJOL, Director of the New York Office of the High Commissioner for Human Rights, introduced the report of the Special Representative on violence against children (document A/63/203). He recalled that, pursuant to General Assembly resolution 62/141, the Secretary-General was requested to appoint, for a period of three years, a Special Representative on violence against children, who was, in turn, requested to report annually to the General Assembly, the Human Rights Council, and the Economic and Social Council. The Secretary-General had undertaken broad consultations with all relevant United Nations actors and was determined to fill that post without delay. The interview panel had commenced its work by interviewing candidates and would soon propose candidates to the Secretary-General.



Next, he introduced the Secretary-General’s report on the rights of the child (document A/63/160), which contained the status of ratifications of the Convention and its two Optional Protocols. He drew attention to a decision of the Committee on the Rights of the Child to request approval, from the General Assembly, to work in two chambers, to enable it to consider more effectively the many reports pending consideration before it.



Finally, he drew attention to the report of the Committee on the Rights of the Child (document A/63/41), saying the Chairperson of the Committee would present an oral report of that body’s work in the period from February 2006 to January 2008.



Questions and Answers



The representative of the Russian Federation asked Ms. Coomaraswamy how it was possible to evaluate, and work out, the mechanisms for monitoring and accountability in situations of armed conflict, and what more might need to be done to ensure the successful functioning of those mechanisms.



Referring to statements made by Ms. Coomaraswamy, regarding children being detained in military prisons and the indiscriminate bombardment of civilian areas, the representative of Lebanon highlighted the fact that those were both challenges that faced the children living in the occupied Palestinian territories. Yet, neither the situation of Palestinian children, nor the obligations of Israel, an occupying power, had been discussed in the report of the Special Representative. He asked the Special Representative why that was the case.



A similar question was asked by the Observer of Palestine, who highlighted the number of children who had died -- more than 1,000 since the year 2000 - in the occupied territories. He asked how the Special Representative would address that issue in the future, and what she and the international community could do to address both that issue and the situation of Palestinian children being held in Israeli detention centres.



Also on the subject of children under detention, the representative of Egypt noted the seriousness of the problem, and asked Ms. Coomaraswamy what she thought needed to be done to help those children, particularly in terms of their release, rehabilitation and reintegration into society. On a more procedural issue, she asked whether the Working Group on children and armed Conflict was still considering holding dual meetings in dual chambers or whether it had considered adding mores sessions to ensure that the full membership would be present at all meetings, allowing all members to consider all reports before the Working Group.



The representative of Egypt also expressed her concern over the slow progress in filling the newly created position of a Special Representative of the Secretary-General on Violence against Children and asked for more information regarding a possible timetable. That same concern, and request for information, was echoed by the representatives of Uruguay and Iraq.



The representative of Libya asked for further elaboration regarding the situation of child detainees in general. He also expressed his hope that the Working Group on children and armed conflict would eventually cover all forms of violence against children in armed conflict situations and would cover more geographic areas of conflict in the future.



The representative of Benin said that trafficking in children was growing in his region and throughout the world. He asked the representative of UNICEF for further information about the situation regarding human trafficking in the subregion. He also drew the Committee’s attention to Benin’s efforts, in light of the adoption of Security Council resolution 1612. He acknowledged that some violations were not covered by that resolution, and as such, he asked Ms. Coomaraswamy what further assistance she might need in the future to help her in her work.



The representative of France asked how the General Assembly might contribute -- beyond renewing its support to the mandate of the Special Representative of the Secretary-General for Children and Armed Conflict -- to strengthening the United Nations system and holding those parties using children accountable.



The representative of Afghanistan said that, due to 30 years of war, children in her country were subject to severe poverty and difficult living conditions. Terrorist groups and activities in the country exacerbated the situation. Women and children were the primary targets of those terrorist groups. Children were often used for criminal acts, and girls were particularly at risk. Indeed, female teachers were terrorized, schools were burned down and threatening letters were often sent to parents, all to dissuade them from sending their girls to school.



The representative of Iraq, referring to language used in the report of the Special Representative, regarding “voluntary” and “ideological” recruitment, said that it would be impossible for a child to be ideologically committed to anything at such a young age, and he, therefore, asked the Special Representative for further elaboration on the subject.



Responding to questions regarding violations against children, as a result of the Israeli occupation of Palestine, Ms. COOMARASWAMY said the annual report did not deal with specific country situations. Instead, she referred Member States to a separate report on her Office’s visit to the Occupied Palestinian Territory and Israel. Her Office was indeed concerned by the killing and maiming of children in that region, and voiced hoped that the current ceasefire would hold. It was also concerned about the effects of public sector strikes on children’s education, since that meant schools were closed. Delays in accessing medical care also posed worries -- most recently, 11 children were reported to have died because of such delays.



On children in detention, she pointed to a set of guiding principles of juvenile justice put forward by the Secretary-General, which posited that the Members of the United Nations would always operate in the best interests of the child. Detention should be the last resort, and alternatives to detention should be used wherever possible. She expressed concern over the situation relating to juvenile detention in Iraq and Afghanistan, and said that there was also a need to examine the issue from the legal perspective. Children should be allowed the right to represent themselves and be heard. She said she had approached national authorities in those two countries, as well as the international forces, in an effort to improve the situation.



She said that once the Special Representative on violence against children was appointed, they were likely to discuss the ways in which they would collaborate on their respective tasks. For example, they might work together in terms of country visits. While her role was primarily a political one, involving advocacy on specific issues relating to armed conflict, she expressed confidence that the two Special Representatives would complement each other’s work.



On child conscription and trafficking of children, she stressed the importance of reintegrating child soldiers, in order to avoid the “recycling” of child soldiers –- for example, starting as soldiers in Benin and ending up in Liberia or Côte d’Ivoire. She made a plea for long-term funding to help further that cause.



Regarding Security Council resolution 1612, she said her Office has asked that sexual violence be included in annexes of the report as a “trigger”, in addition to recruitment and child soldiers. In addition, her Office had suggested that a mechanism be in place to enact sanctions against the 16 most persistent violators, and that the issue of sexual violence against children in armed conflict be included on the agenda of the Security Council Working Group on that issue. To strengthen the General Assembly resolution on the Ten-Year Review of the World Programme of Action for Youth, her Office had made suggestions regarding the use of more explicit language on sexual violence, prosecution and reintegration, as well as on the need to emphasise all other rights of children, such as the right to education, nutrition and health. She observed that the Security Council could deal with issues regarding punishment for violations, while the General Assembly could deal with “child rights” issues.



She ended by thanking the Governments of Afghanistan and Iraq for facilitating her visits to those countries. Regarding the question of so-called “voluntary” involvement in the army, she said no recruitment under 18 was deemed such. Nevertheless, it was important to understand that some children drifted towards the army because they romanticized the idea of “heroic death”, which in turn was propagated by the adults. “It’s not always by abduction,” she stressed.



The next to speak was Mr. HOURY, who responded to the questions regarding the Special Representative on violence against children. He said that interviews were still ongoing and added that the selection would take place soon.



Regarding how UNICEF would coordinate with the Special Representative, he said UNICEF had adopted a child protection strategy that incorporated all recommendations contained in the Secretary-General’s study on violence against children. UNICEF would work closely with the new appointee, in line with that strategy, and UNICEF would provide support, as requested. The World Health Organization (WHO), the Office of the United Nations High Commissioner for Human Rights (OHCHR) and the International Labour Organization (ILO) were other close partners in that process.



On the question of regional approach to trafficking of children in West Africa, he said efforts were under way to crate a holistic response, incorporating prevention, protection and institutional reform within countries.



Mr. MBAIDJOL said the Special Representative of the Secretary-General was required to adhere to terms of reference established as a result of resolution 62/141. He or she was expected to head the inter-agency committee and coordinate its activities. Regarding the question on the Committee on the Rights of the Child, he said the Chair of that body would soon address the issue.


Published on: 2008-10-16


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World Markets Fall as Investors Weigh Relentless Trouble

http://www.nytimes.com/2008/10/17/business/economy/17econ.html?hp

October 17, 2008
World Markets Fall as Investors Weigh Relentless Trouble
By PETER S. GOODMAN
Stock markets plunged anew on Wednesday, nearly wiping out the record gains of Monday and sending another wave of wealth destruction washing over American households.

The government’s rescue of the banks has been widely embraced, but the frenzied selling, which pushed the Dow Jones industrial average down 733 points, underscored how the economy’s troubles are too broad to be fixed by the bailout of the financial system.

In trading in Asia on Thursday, the markets followed Wall Street’s lead. The Nikkei closed down 11.41 percent, or 1,089.02 points, the Hang Seng dropped 1,312.91 points, about 8.5 percent, the South Korean Kospi fell 8.25 percent, the Standard and Poor’s/Australian Stock Exchange 200 index shed 7 percent and Taiwan dropped 3 percent.

Investors are recognizing that the financial crisis is not the fundamental problem. It has merely amplified economic ailments that are now intensifying: vanishing paychecks, falling home prices and diminished spending. And there is no relief in sight.

Wednesday’s rout began in the morning with the latest evidence of the nation’s economic deterioration — reports showing that retail spending slipped in September and broader signs of a pullback among suddenly thrifty American consumers.


Selling picked up momentum in the afternoon as the Federal Reserve’s chairman, Ben S. Bernanke, cautioned Americans that the bailout would not swiftly lift the economy and that continued weakness was certain.

“Stabilization of the financial markets is a critical first step, but even if they stabilize as we hope they will, broader economic recovery will not happen right away,” Mr. Bernanke said in a speech to the Economic Club of New York. “Economic activity will fall short of potential for a time.”

By day’s end, the Dow had surrendered most of Monday’s 936-point gain, dropping 7.87 percent. The broader Standard & Poor’s 500-stock index was down 9 percent, and the technology-heavy Nasdaq was down 8.47 percent. Expectations that a worldwide slowdown will reduce demand for oil pushed prices below $75 a barrel. Signs of improvement continued in the credit markets, making it somewhat easier for companies and states to secure financing, but interest rates remained elevated.

Mr. Bernanke’s remarks — offered in the sober tones of a man cognizant that a stray syllable may prompt the loss of more billions on Wall Street — underscored the reality that the economy’s troubles go well beyond the financial crisis. The United States and many other major economies are almost certainly headed into a slog through economic purgatory, one that could last many months.

“People have focused so much on the immediate financial crisis that they haven’t realized how much the real economy is going down, largely independently,” said Dean Baker, co-director of the Center for Economic and Policy Research in Washington. “I don’t think there’s a way we can get out of this without a full-fledged recession and a lot of people losing their jobs. All we can really talk about is ameliorating it, making sure the people who are hit have support.”

On Monday, as the Dow posted its fifth-largest one-day percentage gain in history, some investors found quantifiable proof that the crisis was solved. Yet an unpalatable historical detail complicated that idea: The four previous largest percentage gains occurred from October 1929 to March 1933, in the early days of the Depression.

Then, it must be noted, the markets swung far more widely than they do in this era, and an epic collapse would still be required to bring the United States anywhere near a comparable depression.

Mr. Bernanke, a leading academic expert on the Depression, offered pointed assurances that no repeat of that disaster would unfold on his watch. The Fed stands ready to use all its tools to battle the financial crisis, he said. He exuded confidence that the American economy “will emerge from this period with renewed vigor.”

But when? Mr. Bernanke could not say. That uncertainty added to the gnawing worry gripping the economy.

“Ultimately, the trajectory of economic activity beyond the next few quarters will depend greatly on the extent to which financial and credit markets return to more normal functioning,” he said.

Strikingly, Mr. Bernanke expressed concern about how huge amounts of capital are increasingly concentrated in a handful of enormous financial institutions.

“The real concern that we have is that we have got and developed, in this country, a very serious ‘too big to fail’ problem,” Mr. Bernanke said. “And that problem, we’ve just recognized now in the current situation, how severe it is.”

It seemed a curious concern for a man whose central bank has worked with the Treasury to engineer a series of shotgun corporate weddings, such as Bank of America’s purchase of Merrill Lynch and JPMorgan Chase’s acquisition of Bear Stearns — deals that have further concentrated money in fewer hands.

Mr. Bernanke’s prognosis and the latest carnage on Wall Street lent urgency to the debate over what the government should do now to soften the blow to the economy.

In Washington, and on the campaign trail, conversation centers on putting together a second round of so-called government stimulus spending, following the $152 billion unleashed this year via tax rebates to households and tax cuts for businesses.

Democrats in the House are drafting a roughly $150 billion package of spending measures aimed at spurring the economy, according to senior aides, including aid for states, large-scale construction projects to generate jobs and the expansion of unemployment benefits. Senator Barack Obama of Illinois, the Democratic presidential nominee, is urging $175 billion worth of relief measures.

The Republican nominee, Senator John McCain of Arizona, has declined to outline his own proposal, though his senior economic adviser, Douglas Holtz-Eakin, said he is “open to any measure that genuinely stimulates the economy.”

Republicans on Capitol Hill have emphasized tax cuts for businesses in any stimulus package, a stance that puts them at odds with Democrats, though recent signs suggest greater potential for a compromise.

“We need fiscal stimulus,” said Douglas W. Elmendorf, a former Treasury and Federal Reserve Board economist, and now a fellow at the Brookings Institution in Washington. “The outlook is much darker than it was even a few months ago.”

The checks the government sent to households last summer appear to have kept the economy growing, but economists are skeptical such a course could work again.

“The spend rate will be really low because people are scared to death,” Mr. Baker said.

When economists met with House leaders on Monday to suggest a course, the favored means appeared to be aiding state and local governments, whose property tax revenues are diminishing as home values fall. Local governments are a crucial source of employment and social services relied upon by the poor.

“The states are taking steps right now that are deepening the recession, through no fault of their own,” said Jared Bernstein, senior economist at the Economic Policy Institute in Washington. “They’re forced to either raise taxes or cut services. Neither of those are where we need to be right now.”

The crisis on Wall Street has sown fears that banks would hold tight to their dollars and starve the economy of capital, preventing businesses from securing finances to hire people and expand. If the bailout succeeds in restoring confidence, that should eventually get money flowing and lift economic activity.

But regardless of Wall Street’s travails, a broader set of difficulties has been taking money out of the economy, putting the squeeze on American households and businesses.

The economy has lost 760,000 jobs since the beginning of the year, and millions of workers have seen their hours cut, shrinking paychecks just as plunging real estate prices prevent households from borrowing against the value of their homes.

In short, American spending power is declining, and this has become a downward spiral: As wages shrink, workers spend less, and that limits demand for workers at the businesses that once captured their dollars.

Many economists now assume that unemployment, currently at 6.1 percent, will climb to 9 percent by the end of next year. Some now envision it could reach 10 percent — a level not seen in 25 years.

“At this point, the thing has probably just got to play out,” said Martin N. Baily, a chairman of the Council of Economic Advisers under President Bill Clinton and now a fellow at the Brookings Institution. “I don’t know that there’s anything that we can do to avoid a mild recession. The question is what can we do to avoid a very severe recession.”



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New World Disorder

http://www.time.com/time/magazine/article/0,9171,1851159,00.html


Thursday, Oct. 16, 2008
New World Disorder
By Harold L. Sirkin

Imagine 100 companies from Former Third World countries with a combined revenue in the trillions of dollars--greater than the total economic output of many countries--competing with U.S. companies for space on the world stage. Imagine several hundred such companies. Now imagine thousands.

You are looking at the future, when U.S. companies will be competing not only with European, Japanese, South Korean and Chinese companies but also with highly competitive companies from every corner of the world: Argentina, Brazil, Chile, Egypt, Hungary, India, Indonesia, Malaysia, Mexico, Poland, Russia, Thailand, Turkey, Vietnam and places you'd never expect. And you can anticipate that future versions of the World Economic Forum's Global Competitiveness Index will be reflecting more rapid ascents and descents than it has in the past. The current financial crisis may only serve to speed up the process.
In the past year alone, for example, Brazil, Russia and China have all moved up in the country rankings and are now lodged in the top half of the list, while the United Kingdom has fallen. One of the biggest gainers from last year to this year is Montenegro, rising from 82nd to 65th place, just behind Turkey and Brazil.

This is the future world of what we call "globality," a world of hypercompetition in which Americans--and Swiss and Japanese--compete with everyone from everywhere for everything. And not just for customers and market share: they'll compete for energy and raw materials, skilled and unskilled workers, knowledge, patents, financing, suppliers, partners, even potential acquirers.



Global competitiveness has been a buzzword in Washington, on college campuses, in union halls, in corporate boardrooms and in the media for decades. What is different in this new era is the scale and speed of the coming challenge, which will see hundreds of companies from developing countries charging at us relentlessly, from all sides, like a modern version of king of the hill. Are we ready?

Most of the world's future economic growth will take place in developing nations, and our growth--and Western Europe's and Japan's--will largely be based on theirs. Do we understand these economies? And are we ready to compete for the business of the billions who live there and are just now starting to move up from poverty to life as consumers--consumers who would love to buy U.S. products because of their quality?

My colleagues and I have examined more than 3,000 companies from developing countries and have identified 100 companies from 14 countries with the near term potential to become global leaders. China is home to the greatest number of global challengers, with 41; followed by India, with 20; Brazil, with 13; and then Mexico, Russia and Turkey. Together, these 14 countries accounted for 17.3% of the world's total economic output, or gross domestic product, in 2006.

Some of the challenger companies have already achieved great success. Among the 66 Asian companies on our list, China's appliance maker Haier has been so successful in the U.S. market that it's investing $100 million in a new factory in Camden, S.C. (And you thought U.S. factories couldn't compete with Chinese factories.) India's Suzlon Energy is among the world's top manufacturers of wind turbines, a renewable-energy technology with a limitless future. And Hong Kong's Johnson Electric is the world's largest producer of small motors.

It's much the same in Latin America, where Mexico's CEMEX, with nearly $21.7 billion in revenue last year, is one of the largest cement producers in the world. Brazil's Embraer is the leading manufacturer of regional jets in the world.

And in Russia and Eastern Europe, Gazprom, based in Moscow, is the world's largest natural-gas company, providing 25% of Europe's natural gas. Another major player in Europe is Turkey's Vestel Electronics, the largest supplier of televisions on the continent.

These are some of the more prominent success stories: companies from everywhere competing with us for everything. Hundreds of other challengers that are relatively unknown today are ready to join them.

To meet this challenge, the U.S., or any other country that wants to remain in the game, can't afford to repeat past mistakes. And the worst mistake of all is complacency--to dismiss the challengers as a nuisance, as the U.S. did Japan in the 1960s, rather than view them as serious competition. You can see the results of complacency when you look at the Big Three U.S. automakers.

In the new world of globality, the new rule is that there are no rules. Just because U.S. companies have always done something a certain way doesn't mean they should continue to do so. Companies need to be fast and flexible and understand their markets and customers as never before.

The road going forward is like an eight-lane highway with no access and egress signs, no directions, no lane markings, no speed limits, no police and no one knowing if they should drive on the left side or the right side of the road. You make your own rules and do your best to get to your destination. In the world of globality, you can't wait for someone else to set the rules.

I like to tell the story of a Chinese manufacturer that was getting feedback about its washing machines' clogging up drains. The company investigated and found that the machines worked just fine but that rural consumers were using them to wash potatoes. What would an American company do to solve this problem? Call in a p.r. firm to tell consumers that washing vegetables voids their warranty? The Chinese company had a better idea: it added a vegetable-wash cycle to its machines. We call this innovating with ingenuity--and no government program can teach this.

Global competitiveness in the era of globality--where the new rules are no rules--requires new ways, new thinking. This is a battle that any nation dares not lose.

Sirkin is a senior partner at the Boston Consulting Group and a co-author of a new book, Globality: Competing with Everyone from Everywhere for Everything

World Economic Forum Who's Got the Edge

Each year the World Economic Forum handicaps 130 countries in the global-competitiveness race. Here are the top 50 [This article contains a table. Please see hardcopy of magazine or PDF.]

2008 2007 1 United States 1 2 Switzerland 2 3 Denmark 3 4 Sweden 4 5 Singapore 7 6 Finland 6 7 Germany 5 8 Netherlands 10 9 Japan 8 10 Canada 13 11 Hong Kong SAR 12 12 United Kingdom 9 13 Korea, Republic of 11 14 Austria 15 15 Norway 16 16 France 18 17 Taiwan, China 14 18 Australia 19 19 Belgium 20 20 Iceland 23 21 Malaysia 21 22 Ireland 22 23 Israel 17 24 New Zealand 24 25 Luxembourg 25 26 Qatar 31 27 Saudi Arabia 35 28 Chile 26 29 Spain 29 30 China 34 31 United Arab Emirates 37 32 Estonia 27 33 Czech Republic 33 34 Thailand 28 35 Kuwait 30 36 Tunisia 32 37 Bahrain 43 38 Oman 42 39 Brunei Darussalam n/a 40 Cyprus 55 41 Puerto Rico 36 42 Slovenia 39 43 Portugal 40 44 Lithuania 38 45 South Africa 44 46 Slovak Republic 41 47 Barbados 50 48 Jordan 49 49 Italy 46 50 India 48
Source: World Economic Forum's Global Competitiveness Report 2008-2009; for the full report, go to www.weforum.org

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Recession On The Doorstep, Knocking

http://www.abnnewswire.net/press/en/58122/Recession_On_The_Doorstep_Knocking.html


Sydney, Oct 17, 2008 (ABN Newswire) - Guess what?

That heavy thump you heard from stockmarkets around the world, especially in the US with the 9% fall in the Standard & Poor's 500 index on Wednesday, was the sound of the last rose coloured glasses falling from the noses of investors, commentators and investment analysts who have finally accepted that the globe is heaving into a recession, led by the tottering US, UK and European economies.

After falling Wednesday, European markets again fell heavily Thursday, but the selling wave in the US slowed as investors accepted the new reality. In fact Wall Street bounced strongly in late trading.

Resources were heavily hit as big investors abandoned their last defensive position..

Wednesday and Thursday saw a collection of figures, reports and comments that confirmed that the global economy will drop below the International Monetary Fund's idea of a global recession in 2009: that's global growth of 3%.

It is now clear that the US economy is sliding, nastily, but speedily into a slump the like of which we haven't seen this side of World War 2. US consumers, who carry the US economy on their backs by generating 70% of annual activity, are being battered into submission.


Consumer spending, consumer credit and retail sales are all falling at levels not seen for decades. There is every chance that October's and November will see declines even sharper than we have seen in August and September.

The monthly investment manager's survey from Merrill Lynch, released overnight, says "Investors are waiting for the right conditions to return to equity markets amid the most pessimistic outlook yet recorded"

The survey, completed as global equity markets fell in value by 18.7%, shows that almost seven out of 10 respondents (69%) believe that the global economy has entered recession, up sharply from 44% one month ago.

Growing risk aversion has led to a record 49% of respondents who are overweight cash.

The number of respondents who believe equities are undervalued has reached a 10-year high, at 43%.

"Fund managers are waiting for the triggers that will give them the confidence to buy," said Gary Baker, head of equity strategy at Merrill Lynch.

What they are looking for is a loosening of monetary conditions and for third quarter earnings to clarify where problems and opportunities lie across equity markets."

But the survey showed that respondents appear to be placing little or no credibility in consensus earnings estimates for the year ahead. A net 92 % of respondents regard estimates as "too high," and more than half say estimates are "far too high."

At a time of global pessimism, the gloom is no more concentrated anywhere in the world than in Europe. A net 41%t of global asset allocators are underweight euro zone equities. Europe has now assumed the UK's mantle as the world's least popular destination for equity investment.

The survey also found U.S. fund managers are now much closer to fully accepting what they expect will be a deep and prolonged U.S. recession.

"In our view, however, it is too soon to say we have reached a bottom in equity markets given the current financial market turmoil," said Sheryl King, senior US economist at Merrill Lynch.
Oddly enough, we should be relieved by this information because there's something comforting by an acceptance of an impending or developing recession.

I'd much rather face that than the absolute fear and loathing we saw on markets last week in the global credit panic.

That's not to say the pressures from the panic have gone: they are still with us, but Wednesday and yesterday's weakness on global markets was more an old fashioned acceptance that economic activity is sliding and that there will be more pain and suffering before we get through it.

But not an absolute and stunning collapse.

We are not out of the woods by a long way, but if central banks and governments hold their nerves, we could get away with just a severe economic mauling instead of a replay of 1932-33.

So what happened?

The US Fed said that economic activity had worsened across all of its 12 reporting districts across the country with falling activity in retail, financial services, housing, tourism.

The Fed's beige book survey of economic conditions revealed pervasive weakness, with tight credit, deteriorating consumer spending and a weak labour market across the nation.

Fed chairman, Ben Bernanke and the head of the San Francisco Fed, Janet Yellen, both made it clear, in their own way, that there was no quick fix or early rebound for the slumping US economy.

That hopes of a recovery in 2009 were misplaced, and 2010 might see some improvement.

US industrial production fell sharply last month, hit by storms, slumping demand and the credit crunch. The Fed said the drop of 6% was the largest for 24 years and production would have dropped even if there hadn't been storms in the Gulf and a strike at Boeing.

Another Fed survey in Philadelphia showed a sharp contraction in manufacturing in the area, while the commercial paper market again shrank, but the rate of decline is slowing as the Fed starts lending money to leading companies.

US retail sales fell 1.2% in September, almost double the fall forecast by economists as cars, food and every category saw weakness. Sales on internet auction site, eBay off 1% in the quarter, the first fall in history of the company.

The fall left retail sales 1% lower than a year earlier, signalling that consumers withdrew substantially from US shops and malls in the month.

A leading member of the US Federal Reserve, Janet Yellen, head of the San Francisco Fed describing the US economy as being in "appearing to be in recession" and worryingly warning of the chances of inflation falling away next year in the US to replaced by price deflation.

The New York Fed produced its general economic index that had its worst reading since it started back in 2001, when the last US recession was starting.

In good and bad news, US producer prices fell for a second month in a row as oil and fuel costs fell, and demand eased.

The US Labor Department reported that prices paid to US producers fell 0.4%, while core price rose 0.4%. It's a sign more and more American companies are finding it tougher passing higher costs on up the production chain.

US consumer price inflation was better than forecast because of the fall in oil prices and slumping demand: they eased 0.1% for the second month in a row and rose 0.1% on a core basis. Inflation over the year to September was up 4.9% from 5.4% in August.

The fall in retail sales was the third in a row, and the deepest: it was driven by that 27% fall in US car sales in the month and falling levels of demand caused by the credit freeze as consumers were refused credit, or stopped buying on the cards.

Economists say that with retail sales down in the September quarter (and consumer spending and credit also lower) its looking certain that real consumption will fall for the first time in a quarter in the US for 17 years.

In Europe, Germany, the continent's biggest economy, has slashed its growth forecast dramatically.

The German government says growth for 2009 from 1.2% 0.2%, reflecting the rising international risks for the economy, although it warned the precise extent of the slowdown would depend on the severity and duration of the financial crisis.

The new estimate matches the joint forecast published by the country's leading economic institutes in their regular Autumn report on Tuesday. The institute also issued a worst-case scenario that could see Germany's economy shrink by 0.8% in 2009..

The fall in retail sales is making US retailers and forecasters increasingly wary about the highly important Thanksgiving-Christmas retailing season: it could be a terrible holiday for consumers, retailers and the economy and analysts now say the US will have its second quarterly slump in economic growth in a row in the December quarter.

Growth this quarter may dip into the red, and that will produce an outright recession by conventional US definitions.

Ms Yellen said the US economy was likely to see "essentially no growth" in the third quarter and that the fourth quarter "appears to be weaker yet, with an outright contraction quite likely."

"Indeed, the US economy appears to be in a recession," Yellen said.

Ebay forecast that quarterly sales, fourth-quarter and annual earnings forecasts would fall as growth slows at its web sites.

EBay forecast fourth-quarter revenue of $US2.02 billion to $US2.17 billion, compared with $US2.18 billion in the final quarter of 2007. the company said the value of goods sold on its sites fell 1% in the third quarter, the first drop in the company's history.

And late in the day the Fed produced its so-called Beige book.

"Reports indicated that economic activity weakened in September across all twelve Federal Reserve Districts. Several Districts also noted that their contacts had become more pessimistic about the economic outlook.

"Consumer spending decreased in most Districts, with declines reported in retailing, auto sales and tourism. Nearly all Districts commenting on nonfinancial service industries noted reduced activity. Manufacturing slowed in most Districts.

"Residential real estate markets remained weak, and commercial real estate activity slowed in many Districts. Credit conditions were characterized as being tight across the twelve Districts, with several reporting reduced credit availability for both financial and nonfinancial institutions.

"District reports on agriculture and natural resources were mostly positive, although adverse weather associated with hurricanes Ike and Gustav negatively affected the South and the Midwest. Inflationary pressures moderated a bit in September."

It was a very gloomy snapshot of an economy heading lower at increasing pace.

The Fed said that shoppers are becoming more price conscious, credit was becoming even harder to come by and this was sapping sales at the nation's retailers, the report said. Given this, retailers foresee a "weaker economic outlook, including a slow holiday season," the Fed said.

The survey was released shortly after Fed Chairman Ben Bernanke, in a speech in New York, warned that it would take time for the country's economic health to mend even if badly needed confidence in the US financial system returns and roiled markets stabilize.

In the UK unemployment is on its way to 2 million sometime in the next six months after another rise in August to 1.79 million, or 5.7%. As bad as that is, the rate is still well under America's 6.1%.

The official figures show that UK jobless rose 164,000 between June and the end of August. The higher-than-expected increase - of 0.5 percentage points to 5.7% was the largest since 1991 and the eighth successive monthly rise. (It's nine in a row in the US).

UK inflation hit an annual rate of 5.2%, a 16 year high.

Our unemployment rate in September rose to 4.3%, where are a long way from the depths of the US and UK economies!

In Europe, new car sales 8.2% last month as the financial crisis put off potential buyers.

The continent's automakers association said in a statement: "The drop in registrations confirms the aggravating market circumstances, as the fall-out of the financial crisis hits auto manufacturers hard."

"Customers are increasingly hesitant to make large expenditures and find it more difficult to get their purchase financed."

ACEA said a total of 1,304,583 new cars were registered in September in the 28 countries it reviewed - the 27 EU member states, minus Cyprus and Malta, plus Iceland, Norway and Switzerland.

In Moscow local bank Globex yesterday banned depositors from withdrawing their money as confidence in the Russian banking system began to show signs of ¬evaporating.

Globex is a mid-sized retail bank with assets of $US4 billion, according to the Financial Times. It's the first Russian bank to experience a run on deposits during the crisis.

It lost 28% of its deposits since the start of last month, according to local analysts.

At least a dozen other Russian banks have reported a sharp rise in withdrawals and account closures.

Hungary was plunged into deeper financial uncertainty overnight with its currency (the forint) and stock market falling sharply and bankers reporting credit shortages, as concern spread across eastern Europe about the impact of the global financial crisis.

In Budapest, the forint fell 5.3% to 266 to the euro and the BUX index of leading stocks closed down 12%, dragged down by a 15% fall of price of OTP, the country's biggest bank. Currencies and stock markets also fell in Poland, the Czech Republic, Romania and Ukraine.

The Hungarian turmoil followed moves by leading banks to stop or curtail foreign currency lending, the dominant form of credit in Hungary in recent years.

Analysts now say there's a rising chance that the inflow of foreign currency will slow, reducing the funds available for financing the country's current account and putting more pressure on the currency and on the solvency of banks and other financial groups.

The European central Bank will lend 5 billion euros to Hungary to support the currency and the economy.

So what does this mean for Australia?

Rory Robertson is an interest rate strategist at Macquarie Group; here's his take on what lies ahead for Australia. It's both positive and negative

Business investment is Australia's "weakest link"

Prospects for business investment have deteriorated sharply across the globe in recent months, as equity prices have imploded, credit conditions have tightened sharply and commodity prices have slumped. Keynes's famous "animal spirits" have been crushed, pretty well everywhere.

This is a big deal for Australia; because business fixed investment (BFI) is at a multi-decade record 16% of GDP, after having trended higher since the end of the early 1990s recession.

In the 2000s, the uptrend in BFI has been driven by spending buildings and structures, a chunk of it mining-related (see top left of p6 at http://www.rba.gov.au/ChartPack/output_expenditure_activity_fincon.pdf ).

With animal spirits, spending power and commodity prices having turning down as the global credit crunch intensified, BFI will be the weakest link in Australian GDP growth in coming years.

Indeed, if the Australian economy goes into recession, BFI will be the main driver, as always.

Household spending will be relatively strong, particularly now that fiscal and monetary policy are providing a large boost to household cash flows via lower mortgage rates, and income top-ups for families, pensioners and first-home buyers (see below; and note the heavy official focus on mortgage rates rather than business borrowing rates, to this point at least).

Four upbeat factors that give Australia a fighting chance in global downturn

As regular readers are aware, I've been a bit of a "doom and gloomer" all year. In a NZ conference call last week, I was asked to say something positive, to highlight any recent positive developments. I highlighted four factors that give the Australian economy a fighting chance in a global recession:

• The RBA's effective policy framework, and plenty of monetary ammunition. The RBA has cut its cash rate by 125bp in the past six weeks, and the standard-variable mortgage rate has fallen by 105bp. The Fed, the ECB and the BOE can only dream of that sort of powerful pass-through.

Moreover, the cash rate still is a relatively high 6%, so there's plenty of room for lower rates as required. I'm guessing the RBA will cut to a "neutral" 5% by Christmas, dragging mortgage and business rates significantly lower (see further discussion below, and attached RBA Watch).

• The weak A$ now is Australia's new best friend, given the substantial recent drops in global commodity prices. The A$'s 20-30% decline from recent highs is a huge free kick to Australian exporters and import-competers, to the extent that it is sustained. As noted here last week, some of our tradeable sectors suddenly are back in business.

Yes, global demand is weakening fast but at least our tourism, agricultural, manufacturing, education and other tradeable sectors will sell more with the A$ near 70 US cents than near 90 US cents (or with the TWI in the 50s rather than in the 70s).

• Canberra's pristine balance sheet means there is plenty of fiscal ammunition (see p8 at http://rba.gov.au/ChartPack/output_expenditure_activity_fincon.pdf ). Canberra has plenty of room for counter-cyclical efforts, including new spending, tax cuts and loan guarantees, while both Canberra and the States have plenty of room to continue the expansion of their infrastructure programmes.

• Indeed, Canberra yesterday announced a pre-Christmas stimulus package worth perhaps 1% of GDP, featuring cash top-ups for pensioners, low and middle-income families and first home-buyers).

• Importantly, with a no-net-debt starting point and Australia's lenders well regulated and still-very profitable, Canberra's guarantee of financial system deposits and selected (new and existing) debt securities is absolutely credible.

• Australia's housing sector is widely seen as having the problem of "under building" rather than "over-building, as in the US. In Australia, rapid population growth - driven by immigration of 100-200k every year for the past decade - has collided with a flat two-decade trend in new home starts of only 150k per annum. Canberra has overseen the biggest immigration programme in Australia's history, without initiating the construction of extra homes ("land release" and "planning" for home-building generally is overseen by State and local governments).

The dismal lack of co-ordination between Canberra and the States on immigration and housing long has been seen as a problem, putting upward pressure on home prices and rents, and reducing "housing affordability". Now, Australia's slow-moving housing-supply response suddenly is a good thing, limiting the size of any future home-price falls (see p4 of http://www.rba.gov.au/ChartPack/output_expenditure_activity_fincon.pdf ).

Immigration and home prices

As you know, falling home prices are a major problem in the US, the UK and parts of Europe. The damage done by falling home prices to banks' balance sheets in these economies - and growing damage to consumer spending - obviously needs to be avoided in Australia.

According, while largely unstated, maintaining Australian home prices near current levels now is a major policy priority for the RBA and Canberra.

Aggressive rate cuts obviously help, so too yesterday's prodding of up-to 150k first-home buyers into action.

In this context, recent reports of growing pressure to reduce our immigration intake are somewhat disturbing.

Recall that, during the early-1990s recession, net immigration collapsed from 170k in 1989 to just 30k in 2003 (lowest four-quarters-ended figure), reinforcing the Australian economy's tendency to stall.
From a macroeconomic perspective, cutbacks of that order this time around should be avoided like the plague (see Net overseas migration to Australia highest on record: ABS and SMH: Rudd flags cut in migrant numbers )

To recap, all the important policy efforts so far are counter-cyclical in nature: in particular, the RBA's rate cuts, Canberra's timely fiscal stimulus, as well as its guaranteeing of aspects of the financial sector, its promotion of mortgage lending and the ban on "short selling" (not to mention the big market-driven drop in the A$).

By contrast, reducing immigration is a pro-cyclical measure, essentially working against the policy initiatives listed above.

RBA policy, lower interest rates, and limiting falls in home prices

Those forecasting big falls in Australian home prices would do well to notice the recent dramatic drop in mortgage rates, with more to come.

The correspondingly sharp drops in interest payments relative to household income render much less relevant the elevated debt/income ratios parroted by some.

Comparing stocks with flows typically tells us little worth knowing; comparing interest payments with income (flow/flow) and debt with assets (stock/stock) provides more meaningful information.

With the world economic and financial backdrop having turned so nasty, aggressive RBA easing was/is the most obvious policy response available to support ongoing economic growth.

And in six short weeks, the RBA has demonstrated that its interest-rate tools are far more powerful than those available the Fed, the BOE and most if not all other central banks. Despite much media focus, elevated inter-bank lending rates haven't stopped big drops in mortgage rates in Australia.

To recap, the story so far:

• the RBA has cut its cash rate by 125bp in two steps (25bp followed by 100bp), with more to come;

• the three-month bank-bill rate (BBSW, a key guide to a chunk of bank-funding costs) has dropped by about 1-1/3pp over the past month, to 6.1%; and

• Headline mortgage rates have fallen by 105bp, to about 8-1/2%. Furthermore, three-year fixed mortgage rates have dropped by more than 1pp and now are widely available near 7%. Other important lending rates also are coming down, though not as quickly.

In Australia, the 84% (105bp/125bp) pass-through so far from the cash rate to standard mortgage rates has greatly surprised the consensus, because when I wrote a note in August headlined "First 50bp of cuts to be 'passed on'", many/most were sceptical to say the least.

Importantly, the latest funding assistance provided by the RBA to major home lenders may mean that the next cash-rate cut will pass-through to headline mortgage rates in full.

That is, the RBA last Thursday announced the availability of six-month and one-year repos against "related party" collateral in the form of residential mortgage-backed securities (RMBS) and asset-backed commercial paper (ABCP).

On top of that assistance, Canberra's announcement on Sunday helps with "term funding" for periods of up to five years (see Expansion Of Domestic Market Facilities and Guarantee of Wholesale Funding and Deposits ).

Critically, recent 1pp-plus drops in cash, BBSW and mortgage rates are gold for Australian home-buyers, providing major cash flow support to the household sector and home prices, something the Fed can only dream about.

That is, despite the funds rate being cut from 5.25% to 1.5%, the rate on (predominant) US 30-year fixed-rate mortgages has dropped by only around 50bp, to 6% or so, when credit is available.




AIR publishes a weekly magazine. Subscriptions are free at http://www.aireview.com.au


About Australasian Investment Review

Australasian Investment Review (AIR) is a free daily news service with a weekly online magazine covering global financial markets with a focus on Australia, New Zealand and Asia.

Each morning (Sydney time) AIR's team of experienced journalists present you with a concise digest of expert opinions and analysis on trends and backgrounds that matter in these markets. AIR is available free of charge.

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