Australian Economic Outlook - June 2009

By Mark Webster, Acacia Immigration Australia Pty Ltd, 18 June 2009

Australia appears to have avoided the worst of the global financial crisis. Whilst Australia is likely to head into a recession, it appears that this will be a shallow and short recession with unemployment levels and GDP contraction significantly less than other developed countries.

The Australian government and Reserve Bank have been proactive in stimulating the Australian economy, and this seems to have been quite effective in lessening economic slowdown in Australia.

Financial System

Australia's financial system was largely unaffected by the global financial contagion - in particular the Australian government stepped in to guarantee bank deposits until 2011 and there have been no major bank collapses in Australia.

National Accounts

Australia's Gross Domestic Product (GDP) rose by 0.4 per cent in the March quarter to be 0.4 per for the year. This was an excellent result in the context of a global recession which has seen 20 of the 22 OECD economies go into recession.

In their latest World Economic Outlook publication, the IMF expects Australia's economy to contract by 1.4% in 2009, before growing 0.6% in 2010.

Inflation

The Consumer Price Index (CPI) for Australia was 2.5% for the first quarter of 2009, down from 3.7% in the previous quarter.

Interest Rates

Interest rates in Australia were cut 0.25% to 3% by the RBA on April 7th 2009. Unlike other developed countries, the spread for home loans is relatively small meaning that most of the benefit of lower rates is passed onto consumers.

Unemployment Rate

The unemployment rate for May was 5.7%, up by 2% but still significantly lower than for other developed countries.

Some unemployment rates for other countries are as set out below:

UK7.1%
Canada8.4%
Eurozone9.2%
US9.4%

Consumer Confidence

The Westpac-Melbourne Institute Survey of Consumer Sentiment for June found that consumer confidence rose by 12.7% from 88.8 in May to 100.1 in June. This represents the largest single increase in 22 years, and is likely a response to the news from the March National Accounts that Australia is not yet in recession, unlike the majority of other countries.

Business Confidence

The latest NAB Monthly Business Survey indicates that business confidence rose sharply in May 2008 - up 12 points to -2. Whilst trading conditions remain relatively weak, this is a good sign that increased infrastrucure spending will result in business growth going forward.

Conclusion

Australia remains an attractive destination for migrants, particularly in comparison to other common destinations such as the US, Canada and the UK.

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