Australia's Economy Strong Enough to Avoid Recession

Article excerpt

THE Australian economy will avoid recession unless Australians talk themselves into one, economic forecaster BIS Shrapnel says.

The Reserve Bank of Australia's rapid-fire rate cuts and the Federal Government's fiscal stimulus package would reboot the flailing economy, the firm's Economic Outlook report tipped.

"Australia is not in the same dire position as other developed western countries," BIS economist Rachael Logie said.

"The US, UK, parts of Europe and Japan are being caught with over-investment, a collapse in property prices and bank balance sheets, problems of bank insolvency and weakening construction, which will mean periods of declining growth for these regions.

"The Australian Banking system faces no such problem. They have lost most of their competitors and will face only minor impacts from direct exposure to overseas problems.

Further, Australian residential property markets are not over-supplied and after the current shock, prices and construction will rise, not fall.

"For now, affordability is improving due to interest rate cuts. Rents continue to rise and with governments contributing to first homeowner deposits, investment in housing is starting to become attractive again. …