SYDNEY (Reuters) - Prime Minister Kevin Rudd warned Australians Saturday to expect more financial hardship as the country emerges from the global downturn, forecasting rising unemployment and inflation.
Rudd also projected that over the next 18 months rising growth would inevitably cause interest rates to rise. He added that rising commodity prices would generate exports for Australia, but also contribute to inflation.
Australia is due to go to the polls by late 2010, and Rudd's economic forecast could stoke speculation the centre-left government could opt for an early election.
In recent weeks, Australian media have reported that Rudd, who is enjoying high opinion poll ratings, may be tempted to go to the polls early to exploit divisions in the opposition coalition.
Rudd has previously said he would complete a full-term.
Australia has so far escaped the worst of the economic slump and technically has not yet slipped into recession. But it has come at a high price, through expensive government economic stimulus measures which have wiped out a once substantial budget surplus.
In an essay published in the Sydney Morning Herald, Rudd said recovery would bring its own share of problems for ordinary Australians, while controlling public spending and returning the budget to surplus would be government priorities.
"Australia will need to work smarter and harder to achieve better national growth in a weaker global environment," Rudd wrote. "Australia's future prosperity will rely on our willingness to make tough decisions, to tighten our belt as the economy recovers and to build our global competitiveness.
"Economic crises contain a paradox of recovery. As growth returns, the economic conditions facing many families will deteriorate," he wrote. "Unemployment will continue to rise even after growth returns."
Figures for GDP growth in the first quarter of 2009 released last month showed the Australian economy grew 0.4 percent in the three months to March, thus technically avoiding a recession.
However, the government's economic stimulus measures have cost A$52 billion (25.5 billion pounds) since last October, and turned a large budget surplus inherited from the previous conservative government into a deficit.
Australia's government has forecast GDP to contract by 0.5 percent in the year to June 30, 2010, grow 2.25 percent in 2010-11 and 4.5 percent in 2011-12.
The Organisation for Economic Cooperation and Development has said Australia's GDP is likely to decline by 0.5 percent in calendar 2009 and grow by only 1.25 percent in calendar 2010.
The International Monetary Fund has forecast growth of 1.1 percent in calendar 2010.
(Editing by Jeremy Laurence)
