And getting worse by the day:
A surprise dive in company profits has all but confirmed Australia will record negative economic growth when the March quarter figures are released Wednesday, quite possibly an even worse result than during the global financial crisis.
Official statistics released Monday show company profits slid 2 per cent during the first three months of the year, led down by a 6.6 per cent collapse in mining profits.
A build up of mine inventories during the quarter suggests miners were simply unable to shift much of what they dug up as floods and Cyclone Yasi closed ports and cut off mines.
Forecasts for the official economic growth figure due tomorrow (WED) now centre around a contraction of 0.4 per cent in the March quarter resulting in growth for the year of just 1.7 per cent.
Australia’s economy most recently shrank during the global financial crisis, losing 0.9 per cent in the December quarter of 2008.
Westpac expects a worse result this time, forecasting negative growth of 1.0 per cent. TD Securities is tipping negative 1.3 per cent.
If so it will be the worst result for 20 years, since the Hawke and Keating administration brought on the recession Australia “had to have”...
Economists say unlike that downturn the effect of this one will be erased quickly as Australia rebounds from the effect of the floods and Japan’s earthquake and tsunami.
Whereas the government had to spend furiously to avoid a second successive quarter of negative economic growth during the 2008 crisis, this time the natural rebound in production after the floods should do the work for it, ensuring Australia records only one and not two consecutive contractions, which is popularly described as a recession.
Ahead of tomorrow’s (WED) figures Treasurer Wayne Swan is trying to frame them as old news saying they will provide a “look back” at “how the economy performed” at the start of the year.
“We all know the heavy toll that natural disasters had on so many families, businesses and communities in the first few months of this year,” he said in a note to journalists.
“No matter the outcome on Wednesday, the encouraging medium-term picture for our economy doesn’t change our task ahead.”
The Reserve Bank board will meet to consider its approach on interest rates six days later on June 7.
Published in today's SMH and Age
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