Sydney - Commodity prices have wilted, imports have
collapsed, business investment has hit the wall, company profits are
down, retail sales are in decline and dole queues are lengthening -
but surprising figures released Wednesday showed Australia's economy
is still growing.
The national accounts show the country had dodged a technical
recession - defined as two consecutive quarters of contraction - by
recording gross domestic product growth (GDP) of 0.4 per cent in the
first quarter.
In the final three months of 2008, GDP contracted by 0.6 per cent
and most analysts had expected another dud quarter.
'Australia is the only advanced economy, as of today, not in
recession,' a beaming Prime Minister Kevin Rudd told reporters.
The United States economy contracted by 1.6 per cent in the first
quarter, Canada by 1.4 per cent, Germany 3.8 per cent and Japan 4.0
per cent.
The shock result is all down to buoyant coal and iron-ore exports
to China, adding zest to output combined with billion-dollar cash
handouts pepping up household spending.
It is also partly due to a 7-per-cent fall in imports as
businesses cancel projects and batten down for tougher times ahead. A
lower import bill, although a sign of failing business confidence,
perks up the statistical picture of the economy by shrinking the
current account deficit.
'Today's figures demonstrate that the government's economic
stimulus is working and it's positioning Australia as the
best-performing economy in the world,' Rudd said in reference to his
cash handouts.
TD Securities strategist Annette Beacher said Rudd's grin was
misplaced because the economy had now been stagnant for three
consecutive quarters.
'So while it looks like we've avoided a technical recession, from
a growth perspective we've gone absolutely nowhere since September
last year,' she said.
Saul Eslake, chief economist for ANZ bank, also cautioned against
exuberance. He warned that 200,000 people would lose their jobs
before the year was out and that the technical qualifications for a
recession would surely be met this year or next.
Rudd said that dodging recession was proof that his strategy of
spending heavily to make up for the decline in private demand was
working.
The counter argument is that racking up billions of dollars on the
nation's credit card has only bought time before Australia falls into
line with other advanced economies and into recession.
Rudd has taken Australia from being debt-free 18 months ago to
massive borrowings and the budget being in deficit until at least
2016.
Chris Caton, the chief economist of BT Financial Group, said the
average Australian was right to think the country was already in
recession.
'The so-called 'technical' definition of a recession - two
successive quarters of declining GDP - is nonsense (because) we know
we're in a recession because of what has already happened to
unemployment.'
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