Need To Find A Mortgage Broker ?
Our Broker Directory makes it easy
Just Click on your State
Then Click on your Suburb
 |
ADVERTISE HERE |
ADVERTISE HERE |
Aussies well-placed for tough year: RBA
March 4, 2009 - 11:09AM
The Reserve Bank of Australia (RBA) says 2009 is shaping as a very difficult year for the global economy but Australia is well-placed to cope with the slowdown underway.
RBA assistant governor of economics Malcolm Edey has told a business forum in Sydney that Australia is expected to suffer some significant short-term weakness due to the sudden deterioration in global conditions in the final three months of calendar 2008.
However, Dr Edey said the measures taken by policy makers - the government and the central bank - would help promote growth and that the Australian economy had remained more resilient than its major trading partners.
"The international deterioration has been so abrupt that it won't be possible to avoid some short-term weakness here," Dr Edey told the Australian Industry Group annual economic forum in Sydney on Wednesday.
"Nonetheless, Australia came into this period with better momentum than most, and with more scope than most to take expansionary policy measures.
"That scope is being used."
The RBA has lopped 400 basis points off official interest rates between September and February, taking the cash rate to a 45-year low of 3.25 per cent.
The federal government has announced two fiscal stimulus packages in a bid to support the economy - an initial $10.4 billion package in December and $42 billion worth of extra spending unveiled last month.
Dr Edey said it will take time for the full impact of these policy actions, particularly the boost to disposable income through government handouts and lower mortgage repayments, to be felt.
"The main effects from these income gains still lie ahead, but we saw some early effects with a sharp rise in retail sales in December," Dr Edey said.
He said household disposable incomes are getting a substantial boost from the combination of falling net interest payments, fiscal transfers and falling petrol prices.
"We estimate that in the past two quarters, household interest payments have fallen by an amount equivalent to about five per cent of disposable incomes - a sizeable cost reduction especially over so short a period," he said.
"I recognise that these effects are not evenly spread across households.
"For households who are interest receivers, there is a loss of income from that source.
"But for the sector as a whole, the net effect is a significant addition to disposable income, which in turn can be expected to support spending."
Dr Edey said the RBA expected a 20 per cent lift in Australia's terms of trade over the year to the September quarter 2008 to be "roughly reversed in the year ahead".
"That will still leave the terms of trade at a high level, but in the near term, it means this effect will be subtracting from, rather than adding to, the growth of national income," he said.
Dr Edey noted IMF forecasts released in late January were for world growth of half of one per cent this year, with the G7 economies contracting by two per cent.
"If these forecasts are realised, it would amount to the weakest year for the global economy, and for the advanced industrial countries, in the post-war period," he said.
"The forecasts do, however, imply some pick-up towards the end of the year and into 2010 as the expansionary measures take hold."
Rate cuts and the large boost to government spending, both here and abroad, have come in addition to measures designed to shore up the financial sector such as government guarantees, capital injections into banks and improved access to liquidity.
"More needs to be done in the major countries on this front," Dr Edey said.
"But there are some tentative signs, at least, that these steps are contributing to some improvement in the functioning of financial markets."
© 2009 AAP