Market bounces, but more troubles on horizon

As the local sharemarket rallied yesterday, up 4.3% after an extraordinary intervention on Thursday night by the world's central banks, the Prime Minister said Australia's fundamentals remained strong, but he could not "put a time limit" on the upheaval.

Australian financial regulators moved last night to restrict short selling, a controversial investing practice that some analysts blame for the recent sharemarket convulsions.

The Government is expected next week to introduce legislation that will tighten Australia's short selling rules. Short selling is when investors sell shares they don't own with a contract to buy them back later, at what they hope is a lower price.

Central banks in Europe also injected more than US$70 billion ($A88 billion) into the system last night, following on from the $US180 billion rescue package launched by the US Federal Reserve and others on Thursday.

But one major retail bank has confirmed the market turbulence will hit Australia's mortgage holders in the hip-pocket.

The National Australia Bank said yesterday it could not guarantee to pass through the next anticipated cut in official interest rates.

An executive from NAB - the bank that grabbed headlines by guaranteeing ahead of its competitors to pass on the September cut in the official cash rate - said it would be unwise to repeat that promise given the uncertainty around funding costs.

"In this time of unprecedented volatility it would be hard for us to make a commitment at this stage as to whether we can pre-emptively pass on a 25-basis-point rate cut," NAB general manager of mortgages Steven Shaw said, appearing before the House of Representatives economics committee yesterday.

Ahead of a trip to New York next week to meet international financial regulators, Mr Rudd said yesterday it was possible economic conditions could improve in 2009, with the International Monetary Fund forecasting a recovery next year.

"We are in for a rough time globally, at least through the course of 2008 (but) 2009 is a more open question," Mr Rudd told 3AW yesterday.

But the Prime Minister rejected an offer by the Opposition Leader Malcolm Turnbull to sit down with the Government in a bipartisan way to address the challenges.

"We are offering the Government to sit down with them, right now, today or on the weekend, or Monday, sit down with the Government and look at the measures that can be undertaken immediately to provide greater security, greater stability for Australian families and businesses in these challenging times," Mr Turnbull told reporters in Canberra.

But Mr Rudd said the best bipartisanship the Opposition could offer would be to pass measures in the Senate safeguarding the budget surplus.

Global financial instability and climate change will be themes of Mr Rudd's address to the United Nations General Assembly in New York next week.

Mr Rudd plans to meet more than 25 leaders in formal and informal meetings during his three days in the US. He has delayed leaving on Monday until after question time, to minimise his time away from Parliament. Even so, he will miss most of the parliamentary week. The PM yesterday stressed his round of economic talks would give him the latest information about the financial crisis.

He also takes to New York a proposal for an Australian Global Carbon Capture and Storage Institute, which other countries will be invited to join. With AAP