Australia’s economy resists recession, records 0.4 per cent GDP growth

Australia's gross domestic product grew at a better than expected seasonally-adjusted 0.4 per cent in the first three months of 2009, according to the Australian Bureau of Statistics.

Te unexpected growth would not only avoid recession as earlier feared, but also help in stabilising the economy as exports and consumer spending improved, helped by the government stimulus packages.

With this unforeseen growth  in the first quarter of this year, the Australian economy has also staved-off an earlier revised estimate of 0.6 per cent contraction in the December quarter.

Australia's surprise growth in the first quarter of 2009 has helped the only major Western country avoid recession in the current global economy depression.

The quarterly growth, although small, indicates that Australia has avoided two consecutive quarters of economic contraction, to be put out of the bracket of the technical term ''recession''.

Australian Treasurer Wayne Swan had said that Australia may post stronger-than-expected economic growth for the financial year to June.

Exports contributed 2.2 per cent to the gross domestic product in the March quarter, up from 1.7 per cent in the December quarter.

Government spending rose 0.3 per cent, while consumer spending rose 0.6 per cent from last quarter, adding 0.3 percentage points to GDP.

Non-farm GDP grew by 0.5 per cent in the first quarter.

Business investment dropped 6.1 per cent, indicating companies were still facing pressure of cutting cost in the wake of dim prospect of earnings growth.

The data also showed a fall in the commodity prices agriculture, mining and construction.

Weathering the global downturn
In the current global financial crisis advanced economies have taken a beating - the US economy contracted by around 1.6 per cent in the first quarter, UK slumped 1.9 per cent, Germany 3.8 per cent, the French economy shrank 1.2 per cent and Japan 4.0 per cent. Even Europe's GDP is estimated to decline by 2.5 per cent in the first quarter of 2009, according to the flash estimates published by Eurostat. (See: Europe's estimated GDP to decline 2.5 per cent in 1Q - Eurostat)

To shield the economy from the global downturn, the government had come out with two stimulus packages, one of A$10.4 billion ($7.4 billion) last year and A$42 billion ($26.5 billion) in February this year to provide cash support for lower-income families and infrastructure projects. The second round of cash handouts were paid out in April. (See: Australia unveils $26.5-billion new economic stimulus)

The stimulus packages and the RBA's cut in the cash rate from 7.25 per cent in September to 3 per cent, a 49-year low in April (See: Rudd asks banks to take cue from RBA rate cut ) helped the economy, reflected in the first quarter GDP results.

''The Australian economy is still not out of the woods yet and the full impact of this global recession may still have some way to run,'' Treasurer Wayne Swan said. ''Australia's economy still faces tough times ahead.''

He added that joblessness still looms large on the economic horizon and the government maintains its projection of 8.5 per cent of unemployment till middle of 2010. Unemployment rate touched 5.4 per cent in April, from 3.9 per cent two months ago.

Reserve Bank of Australia governor Glenn Stevens said the central bank was prepared to further cut interest rates to support a ''durable upswing'' but also cautioned that unemployment could weigh the economy down.

''While consumer spending has maintained up so far, it may weaken over the next few months, as the one-off government payments and rising unemployment may start to weigh on incomes and curtail spending,'' Stevens added. (See: Australia records $19.3-billion consumer spending in March quarter, avoids recession)

''Our expectation remains that the economy will be well placed for growth towards the end of this year. The considerable economic policy stimulus in progression in most countries is helping to contain the downturn, and should support an ultimate recovery. The turnaround is clearest in China and some other emerging countries,'' he said.

But economists warn that Australia's economy is still very weak and expect growth to take place around this year end or early 2010. In its budget, presented in May, the government estimates GDP growth to be flat for 2009-10 and forecasts a contraction by 0.5 per cent in the 2010-11.

Best for business
Despite its economic travails, Australia was recently voted as the best place to run a business during the economic downturn, followed by China, according to the results of a recent survey that polled 7500 global executives from 24 countries (See: Australia tops in beating economic downturn)