Australia: Survey Points to Recession

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BBC

Tuesday, 13 March, 2001, 07:23 GMT Surveys point to Aussie recession

Traders watch stock prices slide, but some remain optimistic. The Australian economy experienced negative economic growth during both the quarter ending in December and the quarter ending this month, according to two surveys.

If the surveys' findings are correct, a recession will hit Australia since the technical definition of recession is two consecutive quarters of negative economic growth.

"If you put the two quarters together, the best you can say is that the economy has stalled. And you would have to admit that there are a lot of conditions out there that are not dissimilar to those leading to major recessions," said National Australia Bank (NAB) chief economist Alan Oster.

"We are clearly in the toughest conditions we've had for ten years. I think what we are seeing is... that March was worse than December," said Mr Oster.

But Prime Minister John Howard rejected such pessimism.

"We think talk of a recession is wrong," he said.

"We think talk in an alarmist fashion is wrong and it's no good for business confidence and it's really no good for anybody."

The surveys, by NAB and the consultants Dun and Bradstreet, showed that the Australian people have lost confidence in the economy.

Expectations have fallen for both employment and profit levels for the next three months.

And weak business conditions were found in several sectors of the economy, including construction, manufacturing, retail and wholesale.

Optimistic government

The bleak economic predictions were seen as another blow to the Australian government which will hold a general election this year.

But if, as the surveys indicated, the economy begins to bottom out in June, the election could be held during an economic revival rather than during a period of economic worries.

Mr Howard believes the economic downturn seen in December was caused by one-off factors and insists the economy is in good shape.

"We've now got a good financial position, our exports are growing, our consumer demand has been off the level of the last four years but [it is] still pretty solid and our interest rates are coming down," he said.

Stock markets fall

The Australian stock market's S&P/ASX 200 leading share index closed 1.7% lower on Tuesday at 3,264.7.

"The market is just responding to more sentiment that the economy is slowing down faster than people expected," said ING Investment Management's Geoff Martin.

But Mr Martin remained fairly optimistic.

"It's a difficult call because it's quite possible that we're already past the bottom in the economy," he said.

-- Rachel Gibson (rgibson@hotmail.com), March 13, 2001


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