Mixed economic outlook for Australia and Asia
Updated
Australia's economy will be the best performer of any advanced nation this year but its recovery will be fragile. The Organisation for Economic Cooperation and Development forecasts Australia will shrink by around half a per cent, before returning to positive growth in 2010. That compares to a contraction across the OECD's 30 industrialised members this year of four per cent. But in its latest report the OECD says the world economy is through the worst of the global ecession.
Presenter: Karen Snowdon
Speakers: Chris Bowen, Australian Finance Minister, Matt Robinson Moodys Economy.com
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SNOWDON: Two major forecasting organisations - the OECD and the IMF have improved their forecasts for Australia slightly. The Australian Government says that vindicates its strategy for tackling the economic crisis. Financial Services Minister, Chris Bowen.
BOWEN: Well, the OECD has confirmed that Australia's the strongest performing economy in the OECD. We've got lower debt and deficits than any other major advanced economy. They've given a tick to our fiscal stimulus, our infrastructure program. But of course they have warned there's a rocky road ahead, which we've been saying for some time and I think it underlines the importance of our fiscal strategy.
SNOWDON: The forecast contraction in Australia's economy of around half of one per cent looks good against the minus four per cent for the 30 most industrialised nations. But the OECD is warning any economic recovery will be weak and uncertain. Australia should grow by about one per cent in 2010 with factors including low interest rates and continued Chinese growth contributing. Matt Robinson from MoodysEconomy.com.
ROBINSON: A one per cent growth rate is well and truly below Australia's long term growth rate but put in the context of a global economy that's contracting between 2 and 3 per cent and most of Australia's contemporaries courting quite severe recessions it is quite an encouraging result and it's certainly reflective of the fundamentals of the Australian economy,
SNOWDON: For the Asia region, there are some encouraging signs that the worst might be over and the downturn has reached bottom. If the only way is up, its still a hard, slow climb. Unemployment is set to rise -- to almost 8 per cent in Australia and almost ten per cent across the OECD. That's 57 million people out of work. Yet Asia's biggest economy, Japan can expect a small improvement next year. After contracting by a forecast 6.8 per cent this year, growth should return in 2010 according to the OECD - but only just. Matt Robinson thinks even that's optimistic.
ROBINSON: We should see come next year some of the moderation in global recession start to improve the outlook for Japan simply because exports can't get any worse than they currently are and starting from a low base they should actually improve quite a bit we expect the industrial sector in Japan lead it out of recession but it will remain below its trend growth rate for at least another 18 months possibly two years. The fact the OECD has come out with a positive result for next year might be a little bit optimistic, we see generally flat recessionary conditions continuing in Japan until later in 2010.
SNOWDON: Just turning briefly to South Korea, which might be deemed the surprise for this year, hasn't got as bad as some forecasts had it earlier in the year when things looked very gloomy in South Korea because of that collapse of exports, what's your take on South Korea, I know the finance ministry there is coming out with quite strong growth figures looking forward.
ROBINSON: I think the 2010 figures are a little bit optimistic, we see a fair bit of weakness in business investment in Korea in the second, third and fourth quarter of this year, we should see a return of exports to US and European consumers later in 2010 and also see a return in business investment later in the year and that should promote growth rates above the 3 per cent mark but it will be sub par for a couple of years.
