Jun 3, 2009, 4:46 GMT
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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