Rising unemployment will be entrenched in the economy for quite a while yet, Prime Minister Kevin Rudd has warned.

Official data released last week showed the jobless rate holding at 5.8 per cent for a second month in a row in July.

But in the May budget the government forecast an unemployment rate of 8.25 per cent by the middle of next year.

"The road to recovery for Australia and the global economy will have many twists and turns and will be a road where we experience many bumps along the way,” Mr Rudd told parliament today.

This, he said, includes rising unemployment.

"As employment is a lagging indicator … (it) will be with us for quite a while yet,” he said.

He said the government must put in place the building blocks for economic growth.

"That means productivity growth,” he said.

"We can’t simply return to the boom and bust economic cycle of the past, we must instead build an alternative model for economic growth for Australia’s future.

"That means investing radically in the long term drivers of productivity growth.”

Treasurer Wayne Swan said two important reports had been released in the past week from the International Monetary Fund and the Reserve Bank of Australia.

"Both of those reports acknowledge and point to the impact of our economic stimulus strategy which has helped cushion this economy from the worst global recession in 75 years,” Mr Swan told parliament.

The IMF said the Government’s measures will add around 3 per cent to gross domestic product in 2009 and 2010 relative to what would have happened if the country had "sat around and done nothing”.

It also said that the shift into deficit was justified in current circumstances, and that commonwealth Government debt is projected to remain low compared with other advanced economies, "leaving Australia in an enviable fiscal position by international standards”.

"It knocks down this argument, particularly mounted from those opposite, that is because the stimulus has been successful it should be withdrawn,” Mr Swan said.

"Of course, an early withdrawal of stimulus would pull the rug right out from underneath the recovery.”

AAP