Even worse than leaked
Describing the world economy as "battered" in the face of "unrelenting turmoil, negative data and sinking confidence" the International Monetary Fund has dramatically cut its global growth forecasts for the year ahead turning almost all of the negative and warning of worse to come without aggressive co-ordinated action boost confidence and spending.
Prepared ahead of a London summit to be attended by 20 world leaders including Kevin Rudd the new forecast came as the United States began effectively printing money, buying mortgage backed securities and government bonds with money it did not have.
Explaining the process on US television ahead of the move the head of Federal Reserve Ben Bernanke said, "the banks have accounts with the Fed, much the same way that you have an account in a commercial bank. We simply use the computer to mark up the size of the account that they have with the Fed."
"It is much more akin to printing money than it is to borrowing."
The announcement that the Fed would buy up to $750 billion of extra mortgage-backed securities and up to $300 billion of government bonds over six months swung Wall Street from sharply negative into positive territory.
The International Monetary Fund slashed its forecast for global growth in 2009 from an anemic 0.5 per cent to negative 1.0 to 0.5 per cent...
As recently as last July it was forecasting positive world growth of 3.9 per cent.
"A shift in the forecast of this magnitude within such a short period of time is, to my knowledge, unprecedented, Reserve Bank Assistant Governor Malcolm Edey told a conference in Sydney.
The new forecasts have the group of advanced economies which includes Australia contracting by an average of 3.5 to 3.0 per cent, "the sharpest contraction for these countries as a group in the post-war period by a significant margin," according to the IMF.
The forecasts incorporate some easing off in the rate at which production is shutting down. The Fund says that in recent months the global GDP has been shrinking at an annualised rate of 5 per cent, led by advanced economies shrinking at an annualised 7 per cent with the US and Japan shrinking at an annualised 6 per cent and 12 per cent.
The IMF forecasts a "gradual recovery" with economic activity rebounding 1.5 to 2.5 per cent during 2010 although it warns this "depends critically on more concerted policy actions to stabilise financial conditions and support demand."
Warning of a "corrosive interplay between financial crisis and real activity," the Fund said "further delays in implementing comprehensive policies to stabilise conditions" would make the recession "deeper and more prolonged".
Speaking with advance knowledge of the IMF forecasts released in Washington overnight Australia's Treasurer Wayne Swan said the world was "experiencing the sharpest downturn in living memory". Australia was in a "deep national economic crisis".
Australian imports of consumption goods fell 13 per cent in Feburary led down by a slide in imports of cars. Car sales fell by 3.5 per cent in the month are are down 18 per cent on a year earlier.
Credit card balances fell in February debt with growth over the last year fsliding to the lowest rate since records have been kept.
Dwelling commencements fell 9.9 per cent in the December quarter to a 8 year low. House commencements fell by 5 per cent while apartments slid 20 per cent.
Detailed Labour market figures showed the biggest job looses in the three months to Feburary occurred in the mining, construction, property and professional services industries. Jobs growth continued in health,administrative support, public administration, utilities and in retail, which has benefiting from the government's multi-billion stimulus programs.