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(CEP News) - Australia is skirting a recession, economists say, after ailing third quarter GDP was revealed today. Speculation mounts over just how low GDP will go in Q4, as the effects of the global financial crisis overlapped by rescue efforts from Australian officials take hold.
Joshua Williamson, economist with TD Securities said today's positive 0.1% result betrays weakness, with non-farm GDP posting a 0.3% decline in an economy that relies very little on agriculture, he said. Total GDP grew 0.1% against forecasts for a 0.2% growth rate and the second quarter's upwardly revised 0.4% growth rate. The original figure was reported at 0.3%. Su-Lin Ong, economist with RBC Capital Markets said the numbers reflect the dismal state of the economy mid-year 2008, with record-high interest rates, high gas prices and plummeting confidence. Now, with major global economies entering recession, she said, "Australia will find it difficult to buck the trend." Williamson said there's a good chance Australia will enter a recession in 2009. "Global demand is going to come right down," he said, and Australia will have, "Much, much much weaker consumption growth, zero support from net exports...it's going to undermine growth in 2009." "Today's result represents the calm before the storm, with the outlook for the economy now perilously close to recession," said Matt Robinson, economist with Moody's economy.com Robinson agreed that were it not for agricultural sector strength, GDP would have contracted. As for the present quarter, he said, businesses are shelving expansion plans, stores aren't ordering inventory and households aren't spending. Furthermore, Robinson said he was skeptical whether the Australian government's A$10.4 billion stimulus plan coming into effect next week will do any good for households. John Edwards, economist with HSBC, felt differently. Edwards said earlier this year the household consumption chunk of GDP was being held back by high interest rates, which starting in September have now been slashed by 300 basis points. Just yesterday, the Reserve Bank of Australia cut by a full percentage point to 4.25%. Edwards is looking on the bright side for the fourth quarter, with a A$10.4 billion fiscal boost on its way next week. "Business investment ought to be o.k., net exports ought to be o.k., it might just be that the result today is the worst(we'll see)," he said. Ong agreed that the swift official action cannot be ignored. With 300 basis points in cuts, the billion-dollar stimulus, a depreciating currency and plummeting petrol prices, "there is considerable stimulus in the pipeline," she said. By Megan Ainscow,
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