October 12, 2008 09:00amPRIME Minister Kevin Rudd today...

October 12, 2008 09:00am

PRIME Minister Kevin Rudd today announced the Government would guarantee all deposits being held in Australian financial institutions for the next three years.

The blanket guarantee was one part of a three-pronged plan to further safeguard Australians from the fallout from the global financial crisis.
See The Sunday Times today for your five-page guide on how to survive the crisis.

The Government will also guarantee all term wholesale funding by Australian banks operating in international markets.

Mr Rudd said this would enable Australian banks to better compete against their global rivals, many of whom were getting guarantees from their governments.

The Government will also put another $4bn into residential-backed securities to help shore up the Australian mortgage market.

Previously the Government said it would guarantee deposits up to the amount of $20,000.

Opposition Leader Malcolm Turnbull has called for a $100,000 guarantee in the wake of Ireland, Britain and the US governments' decision to lift bank guarantees.

Treasurer Wayne Swan has warned that unemployment in Australia was set to rise and Budget spending would take a hit.

With no end in sight to the collapse in confidence around the world, Mr Swan said it was clear the jobless rate at home would inevitably go up.

Ominously, Mr Swan also forecast that the global "viral" meltdown was now bound to hit "developing economies".

That means, in Mr Swan's assessment, that China is about to engulfed by the global liquidity crisis.

China's boom has so far insulated Australia against the worldwide drama in financial markets.

But in a bid to restore the confidence of homeowners, Mr Swan said any decline in the value of homes would be limited.

"If you wanted to be in the housing market at the moment, you'd want to be in the Australian housing market," he said. "The collapse in prices between the US and Australia is simply not comparable.

"There is a shortage of housing in Australia and in the US there is a surplus."