25 June 2009
Australian economy expected to soar
Australia is set to soar out of its economic downturn sooner and more sharply than forecast in the budget, according to forecasts from the Organisation for Economic Co-operation and Development.
The Sydney Morning Herald reported that the OECD says the Australian economy should shrink 0.3 per cent this year, less than any other OECD economy.
Next year the economy should roar back 2.4 per cent, above budget forecasts and more than any other OECD economy.
The Australian Government Treasurer, Wayne Swan, said the forecasts were evidence Australia was "outperforming every other advanced economy in the face of the recession".
The forecasts show Australia's unemployment rate reaching 7.9 per cent late next year rather than the 8.25 to 8.5 per cent range assumed in the budget in May. They also suggest a milder build-up in government debt than forecast at budget time as increased tax revenues kick in more quickly.
The difference between the Treasury's May forecast and the OECD's June forecast is not thought to represent a difference of opinion. Treasury and Reserve Bank staff worked closely with the OECD in preparing the report. Rather the change is thought to indicate the speed at which the global economy is improving.
The OECD update is the first in two years to revise projections up rather than down. The organisation now expects developed economies to shrink by just 2.6 per cent this year, down from the 3.4 per cent it forecast in March. It expects the US economy to shrink by 1.7 per cent instead of 3.5 per cent, and Japan to shrink by 3.6 instead of 4.4 per cent.
"Activity now looks to be approaching its nadir," said the OECD chief economist, Jorgen Elmeskov. "Thanks to a strong economic policy effort an even darker scenario seems to have been avoided."
The OECD identifies China as the driving force behind the global recovery, crediting "massive government stimulus" measures with lifting expected growth there this year from 6.3 per cent to 7.7 per cent and to 9.3 per cent next year.
The OECD specifically commended the infrastructure spending and cash bonus payments given by the Australian Government earlier this year, describing them as "welcome" and "boosting" domestic demand.
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