An unscheduled early release has revealed a sea of red in worldwide growth forecasts to be released by the International Monetary Fund next month.
The update, outlined to reporters in Portugal by Teresa Ter-Minassian, an adviser to the IMF Managing Director comes as Westpac has declared a recession in Australia all but inevitable.
The new IMF forecast has activity shrinking in every region of the world but Asia this year.
Whereas the Fund's last official forecast in January had the globe growing by 0.5 per cent the April update will have it contracting 0.6 per cent.
The worst affected nation will be Australia's biggest customer Japan, whose economy is expected to shrink 5 per cent...
The United Kingdom is expected to shrink 3.8 per cent, the United States 2.6 per cent and mainland Europe 3.2 per cent.
Until now, all the IMF has said is that it expects global economic growth to be "below zero" and Managing Director Dominique Strauss-Kahn has called the slowdown the "Great Recession".
"The scenario will be worse, but the managing director has already said this," said Ms Ter-Minassian to reporters at a conference in Lisbon.
"This is a true global crisis, impacting all parts of the world and countries at different levels of development."
The Westpac-Melbourne Institute Leading Index slipped to minus 3.1 per cent in January, a long way below its long term trend of plus 3.2.
"The Leading Index is now in deeply negative territory consistent with contracting economic activity. There are only four occasions in the 49 year history of the Index in which its growth rate has fallen lower," said Westpac economist Matthew Hassan. "Each of these was followed by a recession."
Mr Hassan said the deterioration had happened faster than in previous recessions.
"The August 1990 low came a full year after the Index’s growth rate
first slipped below zero. The current cycle has already seen the growth rate collapse to a similar level, but in less than six months.”
The leading index is made up of data found to point to the condition of the Australian economy 6 to 9 months ahead of time. These include company profits, factory overtime and building approvals.
Mr Hassan said retail sales were holding up better than expected, most probably as a result of the government's bonus payments, creating some grounds for optimism.
“Indeed, more generally the policy response to date suggests the economy is not heading for a repeat of the early 1990s experience."
"Both monetary and fiscal policy has been eased aggressively and early," he said.
"At the same time, Australia is not having to deal with the same sort of problems that badly undermined the banking system in the early 1990s – the sharply unwinding boom in commercial property in particular. ”