Stimulus measures and falling interest rates helped pull Australia out of the GFC, now IBISWorld looks at the year ahead
March 30, 2010
While many nations continue to feel the effects of the infamous GFC, new performance figures for the period reveal Australia’s economy has held out remarkably well.
Leading market researcher IBISWorld has released a new report which shows Australia’s national GDP only fell in one quarter (December) by 0.9 percent.
Putting this into global perspective, IBISWorld General Manager (Australia) Robert Bryant says the recession saw the UK record a plunge of -6 percent, USA -3.8 percent, Canada -3.2 percent, Germany -6.7 percent, Italy -6.4 percent, France -3.5 percent, and Japan a whopping -8.6 percent.
STIMULUS MEASURES
The government’s stimulus packages are what helped give a much needed boost to the Australia economy and provided a lift for retail spending, according to Bryant.
“The first round of stimulus handouts arrived in bank accounts in December 2008, providing a boost to Christmas spending, and the second was distributed primarily in April 2009, lifting end of financial year expenditure,” he says.
The positive effect of this cash injection can be seen in the performance figures, which shows national disposable income increasing by 8.7 percent in the December 2008 quarter to $195,733 million, and again by 1.7 percent to $198,939 million in the June 2009 quarter.
“Falling interest rates also assisted in alleviating some of the strain, reaching a 49 year low of 3 percent in April 2009,” Bryant adds.
A POSITIVE OUTCOME
While GDP certainly decreased during the GFC, Australia avoided sliding into an official recession.
Although the unemployment rate rose (reaching a high of 5.8 percent in June 2009), those who retained employment actually experienced an overall increase in disposable income, according to Bryant.
“Many Australians are actually in a better position now than before the downturn – what with significantly lower interest rates and greater national disposable income (estimated by IBISWorld to reach $194,500 in the March 2010 quarter compared to about $181,000 million in late 2007),” he says.
“Add to this lower fuel-prices (now at US$80 per barrel compared to US$145 per barrel in mid-2008) and it’s not surprising that household spending has been relatively strong over 2009-10.”
OUTLOOK
While IBISWorld believes that on average households remain better off now than before the downturn, Bryant says the First Home Owner Boost encouraged many Aussies to enter the mortgage market – meaning we are just as indebted now as pre-GFC.
“And what with rising interest rates, fuel and electricity prices, many Australian families may again feel the pinch in 2010-11,” he says.
Nonetheless, conditions are forecast to continue to improve, with IBISWorld projecting slow economic growth in the March 2010 quarter will be replaced by solid growth for the remainder of the year, as households continue to spend and businesses join the fray.
“IBISWorld also expects the unemployment rate to continue to trend downwards and, barring any reversal of the improving trend internationally, we are forecasting the Australian economy will remain strong for the foreseeable future,” Bryant says.