Brazil's Rousseff says austerity needed to lift economy

[BRASÍLIA] Brazil's leftist President Dilma Rousseff, elected to a second term in October despite overseeing four years of pallid growth, Tuesday stressed the need for lower spending to balance the books and revitalise the economy.

"Having the public accounts in order is necessary to keep inflation under control, bolster economic growth and provide a sustainable guarantee of jobs and wages," Rousseff insisted.

Rousseff has faced a battle with some sections of her Workers Party (PT) to sell the need for austerity if Brazil's economy is to return to growth and also stem rising inflation.

Two weeks ago, her government announced budget cuts expected to total US$8.4 billion a year after Rousseff signed a decree limiting discretionary spending on travel, services and purchasing.

Brasilia is also tightening access to unemployment insurance after the public accounts deteriorated in her first term amid massive provision of social welfare programs begun under PT predecessor Luiz Inacio Lula da Silva which lifted tens of millions of people out of poverty.

While underlining the need for a measure of austerity, Rousseff vowed to protect workers' rights gained over more than a decade of PT rule and ensure that Brazil pursues "gradual fiscal adjustment" as she tried to refloat South America's largest economy.

"The adjustments we are making are necessary to stay on course while preserving social and economic priorities," she insisted.

"Labor rights are untouchable and it will not be our government, a workers' government, which will revoke them," she said after talks with her new cabinet in Brasilia, pledging to reverse waning investment.

Brazil's central bank earlier this week forecast growth would barely come in above zero in 2015 compared with four years ago, when Rousseff became her country's first female leader.

Inflation is meanwhile running at 6.99 per cent, above a government ceiling of 6.5 per cent.

Brazil posted its first annual trade deficit in 14 years earlier this month amid a falloff in Chinese-led demand for its raw materials and lower manufacturing goods demand from struggling neighbour Argentina.

On jobs, however, the government can point to unemployment having hit an historic official low point of 4.8 per cent in November.

AFP