News Room - Business/Economics

Posted on 31 Mar 2009

Australian GDP to shrink this year

A top central banker acknowledged Tuesday what many Australians have felt for months: a recession is on or just around the corner.

 

Australian officials have been resisting using the "R" word despite wave after wave of gloomy economic news, fearing it would further jangle the raw nerves of investors and consumers.

 

Ric Battellino, the Reserve Bank of Australia's No. 2 official, went further than most during a speech in the northern city of Brisbane.

 

He said even the bank's recent string of aggressive interest rate cuts and multibillion-dollar government stimulus packages would not be enough to shield Australia from the global financial meltdown.

 

"These measures will go a long way to offsetting the negative influences on the economy coming from abroad, but the reality is that we cannot fully insulate ourselves from what is happening elsewhere in the world," Battellino told an urban planning conference.

 

"As such GDP is likely to fall in 2009," he said.

 

During a question and answer session after his speech, Battellino said gross domestic product was likely to contract for the next few quarters.

 

Two consecutive quarters of GDP contraction are considered a recession.

 

In the final three months of 2008, Australia's GDP shrank by 0.5 percent, ending 17 years of uninterrupted growth that had been fueled by Chinese demand for raw materials such as iron ore.

 

Australia's export-dependent economy has proved remarkably resilient during past international downturns, particularly the Asian financial crisis in the late 1990s.

 

It is also well placed to survive the current turmoil. While share markets and business and investor confidence have plummeted, Australia's banking system is better regulated and stronger than those in the United States and Europe.