Australia Outperformed Rest of Advanced Nations

The Australian Treasurer Wayne Swan claimed that his country continued to outperform most other nations even as the impact of the global economic crisis eroded almost all economies. He made this statement ahead of the final economic data to be released before the holiday season by the Australian government this week.

In his weekly economic note, Swan used an analysis of national accounts data, released last week, to highlight the strength of the economy. He largely depended on the data released by the Australian Bureau of Statistics (ABS) which stated that the Australian economy expanded by 1.1 percent in 2008-09 while most advanced nations experienced deep recession.

It is observed that the Labour government’s fiscal stimulus package to the tune of Aus$70bn helped to a great extent to leapfrog the crisis at a faster pace in comparison to other advanced nations. In stark contrast, the major advanced economies contracted by 2.9 percent over the same period, including contractions of 2.2 percent in the US, 3 percent in the UK and 5.1 percent in Japan.

On the contrary, a Reuters survey finds most market watchers now believe the ABS will report that growth actually went backwards in the September quarter - despite rising employment and booming house prices. The survey said the second quarter recorded 0.6 percent growth whereas just 0.4 is expected of the September quarter with annual growth unchanged at 0.7 percent.

Chief economist Craig James of CommSec, largest stockbroking firm of Australia shared similar views by adding that key spending components of GDP, such as inventories and net exports, were pulling in opposite directions. However, he expressed confidence that growth would rebound this quarter and pick up pace through 2010, underpinned by housing and engineering construction.

In the wake of relative growth projections, the Reserve Bank of Australia (RBA) lifted the cash rate this month by 25 basis points to 3.75 percent. The forthcoming minutes of the RBA will give a better picture which way the interest rates will go.

By Jose Roy