The past week has been an interesting week in the world of the Australian economy. Statistics seem to drive the political cycle and this makes for interesting viewing in the times we are currently living.
On Tuesday after the RBA decided to hold interest rates on hold for March (after 5 succesive cuts of the cash rate from 7.25% to 3.25%) in a 'vote of confidence'.
In his statement on 3/3/09 Glenn Stevens stated "In Australia, demand has not weakened as much as in other countries and, on the basis of currently available information, the Australian economy has not experienced the sort of large contraction seen elsewhere."
Then on Wednesday the figures the government has been dreading were released. The December quarter growth (GDP) figures showed the economy contracted by 0.5%. This is the first period of negative growth since Dec 2000. The ABS figures also showed that the end of year figures (0.3%) were the lowest since 1990.
Interesting the manufacturing sector contracted by 4.7% and the TCF by 8.5%. On the positive side the agricultural sector expanded production by 10%.
Finally today (Mon 9/3) the World Bank has released a report stating that the volume of world trade will decline for the first time since 1982. Secondly in a report the bank has prepared for next weeks G20 meeting the World Bank states that the world economy will shrink for the first time in 60 years. They have advised developing nations to monitor their banking sectors and to stay away from protectionsim which in their view will 'deepen the crisis'.
Interestingly they te World Bank also suggest that governments like Australia should "create a "vulnerability fund" and to set aside a fraction of what they spend on stimulating their own economies to help others.
After all that dastardly news the positive spin is whilst most of the major OECD nations are officially in recession Australia has the lowest negative growth.
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