Australia still faces recession danger: forecaster

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Monday, April 9 12:01 AM SGT

Australia still faces recession danger: forecaster SYDNEY, April 9 (AFP) - The prospects of recession still loom over the Australian economy, and could force interest rates even lower than the current 5.0 percent, forecaster Access Economics said Monday.

Access Economics' projected outlook for the business sector over the next five years said the Australian economy was likely to come so close to recession that official interest rates could fall as low as 4.75 percent -- the trough attained during Australia's last recession in 1991.

The Reserve Bank of Australia cut the overnight cash rate to 5.0 percent last week -- the third cut to interest rates in as many months -- after the Australian economy contracted by 0.6 percent in the December quarter.

A second successive quarter of negative growth would fulfil economist's rule of thumb criteria for technical recession.

On the positive side, Access Economics forecast that Australia's current account deficit would continue to improve, and that any economic downturn would also ease inflationary pressures.

However, national Treasurer Peter Costello's prediction that the 2001/02 fiscal year would bring an unemployment rate "with a five in front" -- would not reach fruition, the forecaster's report said.

"It is already too late for either further interest rate cuts or extra government spending to help Australia avoid downturn," the outlook report said.

"The risk is that the authorities overreact: rates may be cut too much, and, with elections looming, the pork barrel may keep rolling for too long."

Key dangers that may finally tip Australia into recession are collapsing consumer and investment spending, which "has seen many companies put off capex spending" and the fact that "too many unsold goods are lying on too many shelves.

"However, fundamentals remain relatively sound, offering hope this will be a short, sharp 2001 shock. It may well yet be followed by global synchronised upswing come 2002."http://asia.dailynews.yahoo.com/headlines/asia/article.html?s=asia/headlines/010409/asia/afp/Australia_still_faces_recession_danger__forecaster.html

-- Carl Jenkins (somewherepress@aol.com), April 08, 2001


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