Australia's economic activity lowest since 1982
Australia's economic activity contracted in February to its lowest level in 27 years, according to figures released on Wednesday, suggesting the country is headed for recession.business Updated: Apr 15, 2009 11:01 IST
Australia's economic activity contracted in February to its lowest level in 27 years, according to figures released on Wednesday, suggesting the country is headed for recession.
The Westpac-Melbourne Institute leading index, which indicates the likely pace of economic activity three to nine months into the future, shrank to minus 5.1 percent from minus 3.1 in January, pointing to a rapid economic slide.
The latest figure, the worst since 1982, continues a consistent run of negative annualised growth readings from positive 0.5 percent in September. "The rate of deterioration of the growth rate of the leading index is truly remarkable," said Bill Evans, chief economist at Westpac, one of the country's biggest banks. "For some months the index has been signalling that the Australian economy will enter a recession." "The weak readings of the leading and coincident indexes suggest that the economy may continue to contract," he added.
Australia recorded its first quarter of negative growth in eight years in the final three months of 2008. Most economists predict a similar result in the current quarter, which would officially put Australia in recession, usually defined as two successive quarters of negative growth.
Evans said the decline was "disturbing" when compared with the milder trajectory of the last recession in the early 1990s.
Global economic conditions are also much worse at this stage than in the previous recession, he said. "The low point of world growth in that period was 1.5 percent in 1991, whereas we expect the world economy to actually contract by one percent in 2009, the first time since World War II," Evans said.
There was "no light at the end of the tunnel" for a number of world economies including the United States, which Evans said could take "years" to return to growth above three percent.
Business and consumer sentiment in Europe was very low, he said, while Asian economies such as Japan and China had been hit by the sharp decline in world trade.
Locally, Evans said rising unemployment and a fall in retail sales were "concerning signals" but said the current recession would be less damaging than the last, due largely to a more aggressive monetary and fiscal policy response.
Australia's central bank has cut interest rates by 425 basis points to 3.0 percent since September, as the government launched stimulus measures worth more than 50 billion dollars (33 billion US) to kickstart spending.