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Source: www.asiaecon.org |

IS AUSTRALIAN ECONOMY REALLY GROWING?


Last quarter Australia showed economy growth, creating a optimism in Asian stocks and increasing the country currency as highest since last October. The three countries had expanded in last few mouths are China, India and Australia. GDP, Gross domestic product for the March quarter grew 0.4 per cent from the previous three months, the Australian Bureau of Statistics said, bouncing back from a revised 0.6 per cent decline in the final three months of last year.


China, Australia’s largest trading partner, is starting to respond to stimulus, the economy is expected to continue performing better than most.  A strong Australian dollar, which rallied to a fresh eight-month high of 82.46 U.S. cents after the GDP data Wednesday, is also likely to squeeze exports, keeping a lid on growth in the year ahead.  Analysts had expected the Australian economy to have risen 0.2 per cent in the first quarter, with many revising their predictions to growth from a contraction after yesterday’s surprisingly good trade figures for the period.  The relief, though, may be temporary as the main contribution to growth was from declining imports (adding 1.6 percentage points), not typically a sign of a robust economy. The business investment was 1.1 points down, a signal that the outlook for jobs is likely to darken further.  “We have dodged the recession bullet for the time being, but in reality we’ve had five quarters of sub-trend growth and unemployment has gone up in that period,” Commonwealth Bank chief economist Michael Blythe.  “So while we might not be officially able to tick off recession, to all intents and purposes, we are there.”  Australia has not joining the list of countries in recession yet, which pleased the investors. The Australian dollar jumped a quarter of a US cent to 82.2 US cents. Australian stocks also rose on the news, extending their advance for the day to 0.8 per cent.  In the other hand, there are several problems on demand, especially from businesses have canceled projects. Australia still faces a fall in its terms of trade in the second quarter as lower prices for exported coal and iron ore wash into the national accounts.  “I don’t think we’re out of the woods yet,” said ICAP economist Adam Carr.“I still think the unemployment rate is going to rise but the data suggest the unemployment rate will be more modest.”  The National Bureau of Economic Research in the US defines a recession as “a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators.”  The chief executive of Australian Industry Group, Heather Ridout, said “fall in imports shows that our domestic demand is very weak”. and she completed “And we still face a long, hard slog to restore our economic health”.

Source: www.asiaecon.org |


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