The Recession That Never Eventuated

The Australian economy has escaped a major recession. Whenever news posts talk about the Global Financial Crisis they seem to find that we have gotten away with a stumpy tail, rather than no tail at all. Many contribute this fact to fiscal and monetary stimulus, here and in China.

It’s great when financial advisers talk about stimulus packages and fiscal matters, but for everyday Mr and Mrs Australia, these words mean jack. I mean, who wants to talk finance when all we want is enough money to feed the children and live a half-decent lifestyle. Let the complicated talks be the worry of those who are wheeling and dealing with our wealth – or the lack of it.

Recession or not in the Australian economy?

According to national accounts, our export volumes rose 1% in the quarter, while the value of exports fell 7.9%. That means, prices fell but we sold more stuff. All this eventuated despite a massive decline in growth and exports among our trading partners.

BHP Billiton said announced its full year profit two weeks ago, they said: “The commodity re-stocking in China now appears largely complete, with substantial inventory-build in specific commodities over the last three months at end-user levels and in strategic stockpiles.”

This boils down to demand from China now depending on demand for China (meaning its exports, mainly to the US). Right now we keep hearing more good news from the US, about the recession being over, or at least the brunt of it.

Gerard Minack of Morgan Stanley made an interesting point yesterday when he said that the high level of household debt in Australia meant that the Reserve Bank’s rate cuts had made a huge impact on our household finances – much more than usual.

Soon enough we’ll see a reversal on that scenario. Let’s not forget the stimulus packet either.

There were four relevant parts to this: cash payments, which bolstered consumption spending, accelerated depreciation for business investment, the turbo-charged first home buyers’ grant, which put a rocket under the construction sector (now being replaced by the schools program) and the Government guarantee of bank funding.

Joe Hockey, Shadow Treasurer said last night the Government over-reacted. He said things were never going to be that bad, but he doesn’t know that.

Source: Smart Company

So what do you think, did we or did we not have a recession in the Australian economy? Your guess is as good as mine.

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