Prime Minister Kevin Rudd conceded last week that rising unemployment meant "continued strong economic stimulus would be necessary through the Budget''.

It comes as the latest Reserve Bank board minutes suggest it will keep rates on hold next month and as its governor, Glenn Stevens, became the latest authority to declare the nation was in recession.

However, Mr Stevens said Australians had reason to be optimistic because the country's economy was one of the best placed to recover from the global downturn.

Meanwhile, a new International Monetary Fund report, published in the last week, said the global financial system "remains under severe stress''.

"Despite unprecedented official initiatives to stop the downward spiral in advanced economies, including massive amounts of fiscal support and an array of liquidity facilities, further determined policy action will be required to help restore confidence and to relieve the financial markets of the uncertainties that are undermining the prospects for an economic recovery,'' the report said. It also said the deleveraging process would be ''slow and painful'' and warned public disillusionment meant there was a risk governments would be reluctant to invest enough money in the recovery.

Treasurer Wayne Swan said although Australia's banks remained sound, the report painted a "sobering picture of the ongoing challenges facing the global financial system''.

* Extract from a full report in Stock Journal, April 30 issue.