Has Australia dodged the recession bullet?

21 Jul 2009, 1:26 pm   -   Source: SBS
Leading economic forecaster Access Economics says Australia is through the worst of the economic crisis, suffering a small recession while most of the world endures a big one. (Chiara Pazzano, SBS)

Leading economic forecaster Access Economics says Australia is through the worst of the economic crisis, suffering a small recession while most of the world endures a big one. (Chiara Pazzano, SBS)

Leading economic forecaster Access Economics says Australia is through the worst of the economic crisis, suffering a small recession while most of the world endures a big one.

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Leading economic forecaster Access Economics says Australia is through the worst of the economic crisis, suffering a small recession while most of the world endures a big one.

Growth: Access Economics predicts Australia's economy will register growth of 0.4 percent in the year to July 2010, while the government projection shows a 0.5 percent contraction.

Unemployment: Access said unemployment was likely to peak at 7.5 percent in 2010, up significantly on the current 5.8 percent but a full point down on the official forecast of 8.5 percent.

Interest rates: The forecaster predicts the interest rates in Australia will stay low.

Trade: Australia is still exporting more than we were when the crisis first hit, courtesy of ramped-up Chinese buying.

But Access Economics doubts that can last.

As attested by the growing queues of ships loaded with iron ore lining up outside China’s ports, the pace of China’s recent buying is simply unsustainable, Access says.

China's bounce 'built on sandy soils'

The report also stressed the importance of China to Australia, saying the Asian giant's earlier-than-expected recovery had helped lift the outlook since the government's last official forecasts in May.
  
But China’s bounce is built on sandy soils, it says, and may not guarantee ongoing gains for Australia’s economy by late 2010 and 2011.

Industries most hit

According to Access, these industries have been shrinking at record speed: clothes, printing, paper, building products, cars, steel. 

Even sectors that usually avoid bigger downturns such as communications and transport have taken their lumps.

Meanwhile, mining, the property sector, business services and communications are expected to bounce back fairly quickly, dragging with them other sectors. 

Worst of global crisis may be over

The Business Outlook report says although lots could still go wrong, also the rest of the world seems to be through the worst of the economic downturn. 

The global policy reaction to the crisis was better and faster than in the Great Depression of the 1930s and all the money thrown at the crisis by world governments have helped the global recovery. 

Interest rates will eventually need to lift sharply from today's emergency lows to keep inflation in check, Access says.


 

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