GDP contraction points towards recession
The Australian economy is sitting on the brink of recession after seeing its first contraction in eight years.
The last quarter of 2008 saw the economy shrink by 0.5%, despite a prediction by economists that there would be GDP growth. The forecast had been optimistic for the Australian economy, especially after a 0.1% growth in the third quarter of 2008, but it seems that the global downturn has finally caught up with Australia.
Prime Minister Kevin Rudd admitted the country may fall into recession, saying that the recent figures showed the nation, “cannot continue to swim against the global economic tide”.
“Australia can reduce the impact, cushion the impact of the global economic tide but we cannot stop it altogether,” he said.
Federal Treasurer Wayne Swan has warned that the economy will take a turn for the worse before it recovers. “There are no quick fixes to the global recession, and many of its effects are yet to be fully felt,” he said. “But the Government is doing everything in its power to cushion Australians from the worst impacts of the global recession.”
While the Reserve Bank of Australia had predicted that the country would ride out the global storm relatively well, the gloomy figures prove that the country is heading for recession.
A fall in manufacturing, wholesale trade and property and business services have been blamed as the major causes for the fall in GDP, and the Australian wine industry has been badly hit.
Exports fell 18% in value last year, with the markets in America and the United Kingdom particularly badly hit.
Only the performance of the agricultural sector has served to keep Australia out of a technical recession, the definition of which is two consecutive quarters of economic contraction.
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