Australian avoids recession as GDP up 0.4pc

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maveri's picture
maveri
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Posts: 159
Australian avoids recession as GDP up 0.4pc

Australian avoids recession as GDP up 0.4pc

http://www.theaustralian.news.com.au/story/0,24897,25580881-643,00.html

Creative Government accounting aside, looks like Australia pulled a rabbit out of it's hat yet again.

What would Australia do if it didn't have all that wealth in the ground?

 

Subprime JD's picture
Subprime JD
Status: Platinum Member (Offline)
Joined: Feb 17 2009
Posts: 562
Re: Australian avoids recession as GDP up 0.4pc

Fact of the matter is that they have tons of wealth in the ground. If they are smart, they will build a system based on sustainability. Of course, humans never look that far ahead and they alongside the rest of the world will take the path of least resistance and mine every rock out of the continent until they become broke, indebted, currency debased, ect ect.

Damnthematrix's picture
Damnthematrix
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Posts: 3998
Australia has avoided a recession but for all the wrong reasons

Recession dodged for the wrong reasons

By Economics correspondent Stephen Long - Analysis

http://www.abc.net.au/news/stories/2009/06/03/2588151.htm?section=justin

Australia has avoided a technical recession - but for all the wrong reasons.

It's great news for the Federal Government and it is fair to say that Australia's economy is in better shape than most economies in the Western world.

But the truth is that despite the positive number the March quarter GDP numbers point to an economy in sickness, not in health.

Bear in mind, this is a highly technical measure. The main contribution to economic "growth" in the quarter was a collapse in imports, though a small growth in net exports helped too.

Thank the farmers for the boost to exports. Exports of cereal grains in particular were up sharply, but prices fell.

Why did imports fall? Largely because business investment has collapsed and companies aren't importing the capital equipment and production goods that they were during the good times.

That points towards rising unemployment as do all the forward indicators on jobs.

Look at the terms of trade (what Australia gets for its exports versus what it pays for its imports). The terms of trade fell 7.8 per cent. It was the surge in the terms of trade during the minerals boom that helped to boost national income, company profits and swell the Government coffers.

The trend is now very much in reverse.

So, national spending slumps and we escape recession on the arbitrary definition of two consecutive quarters of negative growth.

It just goes to show the silliness of getting hung up on the "technical" definition of recession favoured by some in the dismal science. The weird thing is that the economy has avoided shrinking because it's in a bad way.

The positive economic growth figure was all but guaranteed after yesterday's numbers on imports and exports, but those numbers were in fact a worry.

Chris Caton, one of the wise old men of economics here, says: "The so-called "technical" definition of a recession - two successive quarters of declining GDP - is nonsense; we know we're in a recession because of what has already happened to unemployment!"

That's how most Australians will measure how the economy is travelling. When people lose their jobs, watch their children struggle to enter the workforce, or see their work hours and incomes dwindle.

Footnote: It would have been a huge shock if the Reserve Bank had cut the official interest rate again, but the tone is dovish and the door is open.

The statement explaining the decision maintains the central bank's optimism that the world economy is stabilising after the sharpest slump since the Great Depression but adds: "The prospect of inflation declining over the medium term suggests that scope remains for some further easing of monetary policy, if needed."

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