The headwinds from the global financial crisis (GFC) early last year have now passed, with the damage not nearly as bad as most feared. The initial demand shock and the subsequent credit squeeze/collapse in confidence/fear of unemployment/precautionary saving logic led most commentators to predict a major recession for Australia. But that did not materialise. Australia escaped relatively unscathed from the GFC with only a moderate downturn.

The world economy is now in a recovery phase. Growth in advanced economies is supported by policy stimulus but is expected to be sluggish this year. Emerging market economies will experience a fast paced recovery due to buoyant internal demand.

In Australia, the upswing is well underway. Australia’s GDP growth for 2009/10 is forecast to grow in year-on-year terms by 2.7 per cent. The key drivers of growth over this financial year include the fiscal stimulus package, very strong economic growth in China and other parts of Asia (boosting Australia’s commodity exports and prices), some major private infrastructure, coal, oil and gas projects and low interest rates. For 2010/11, GDP growth is forecast at 3 per cent, with housing to be the key driver of growth.

Topics in February

• December quarter consumer price inflation
• Retail sales analysis and recent developments in employment
• International economy
  

Topics in March

• December quarter National Accounts analysis
• Investment and construction outlook
• Industry employment and output outlook
• Revised forecasts 

Kirrily McNamara

PH: +61 2 9959 5924