Westpac has recanted. Until yesterday the bank's forecasting arm was officially among Australia's most pessimistic, predicting 3 successive quarters of negative economic growth this year - a recession by any definition.
It's now revised away all but one of those negative quarters, expecting just a single contraction in the three months to September, surrounded and overshadowned by positive growth throughout the rest of the year.
"Exports are turning things around, but also confidence," chief economist Bill Evans explains...
"Our exports surged a surprising 2.7 per cent in the March quarter. We are expecting an extra 1 per cent in the June quarter - enough to turn our GDP forecast from negative to positive."
"Beyond that its confidence, and it's something of a circular story. Consumer confidence surged because we avoided a recession earlier this year. We know that surging consumer confidence lifts purchases of non-essential goods. So we've changed our forecast of flat consumer spending in the second half of this year to growth."
"There's no doubt incomes are down, we are working in fewer jobs for fewer hours. But we've salted away a lot of savings we can draw on, especially those of us who kept making mortgage payments at the old rate."
"The first stimulus package didn't boost confidence, but the second own did, along with news that we weren't in recession."
"When things turn down households at first fear for their jobs and cut back on spending, but after a year in which most haven't lost their jobs they start to say: it looks like I'm okay, and by the way I've got lower interest rates, some money from the government, some money saved and a job."
Mr Evans says improving property prices are the bedrock to the the growing confidence, and they are now spreading well beyond the cheaper suburbs whose prices were initially lifted boosted by the first home owners boost.
"Businesses will respond to to the extra spending by hanging on to staff and persevering with investment plans they would otherwise have cut."
"There will probably be continuing problems with the world financial system, but that's now a second-order story, it shouldn't dent confidence."
Only two things temper Westpac's new optimism. Mr Evans says the recovery should be "slow and measured," unlike the previous boom, and interest rates won't fall any further. Until this week Westpac had been expecting a series of further cuts from the Reserve Bank to take the cash rate down from 3 per cent to 2 per cent. Now the chief economist says there will be none.
"Nah, not a chance," he says.
Published in today's SMH
Westpac Forecasts June
Westpac Forecasts July
UPDATE: As Bill Evans tells it, this afternoon
Evans July 24