12 August 2009

Australian economy predicted to avoid recession

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Australia’s economy will this year avoid falling into its first annual recession since 1991, thanks to government spending and housing, BIS Shrapnel Ltd. said.

Australian economy

The Australian economy is expected to avoid a recession this year according to a forecaster.

The Sydney-based forecaster's report predicted gross domestic product will rise 0.1 per cent in 2009 and 0.5 per cent in the twelve months through June 2010. 

Government spending of A$22 billion (£11 billion) on roads, railways and other infrastructure, plus grants of as much as A$21,000 to first-time buyers of newly built homes, will offset weaker consumer spending, BIS Shrapnel said.

The economy unexpectedly grew 0.4 percent in the first quarter from the previous three months, when it shrank 0.6 percent.

“Positive net exports, a turnaround in the stock cycle, housing construction and government spending will combine to prevent a contraction in the economy,” said BIS Shrapnel economist Richard Robinson.

“However, I wouldn’t rule out another negative quarter of growth occurring at some stage.”

As income growth slows and higher unemployment erodes confidence, consumer spending will “moderate” in the second half of this year and “only grow weakly” in the first six months of next year, BIS Shrapnel’s report said.


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