We’re not out of the woods yet:Swan

Australia has escaped a technical recession, at least for now, but Wayne Swan readily admits “we are not out of the woods yet.”

The growth – of 0.4 percentage points – that this country chalked up, during the March quarter was, certainly, a conspicuous event in a world ravaged by recession.

No less than 20 of the 22 OECD countries, which have reported their March quarter results, actually contracted in that time.

So, while welcome, our March quarter result still needs to be assessed cautiously.

Australia is one of the world’s great trading nations.

So what happens overseas matters here too.  A lot.

And the average contraction, among those OECD countries, was a very substantial 2.2 per cent.

So how did escape the technical recession, that was widely expected.

The government is claiming much of the credit, pointing to the stimulatory measures it has taken.

The Statistician’s figures support for that claim.

The first round of the stimulatory package was aimed squarely at consumers.

And they did, apparently, spend their $900 payments.  That shows up in the Bureau’s conclusion that household spending rose by 0.5 percentage points, in the March quarter.

Shoppers don’t usually rush out to spend, at the start of a recession.

But the government had some help, too.

Exports rose by 0.7 percentage points in the quarter, with farm exports taking a starring role.

However Mr Swan said there is still clear evidence that the global recession is hitting Australia.

He says this underlines the need for the government’s nation building investments.

There is, as always, room to argue about the words.

Business investment has fallen sharply and major companies, throughout Australia, are looking for ways to cut back on their work forces,

And some economists are saying that it would still be realistic to think of Australia actually being in recession, despite the March quarter’s surprising result.

Related stories:

1. Australia expected to slide into recession this week
2. It will be worse – and longer – Swan

Retail sales up, but…

Wayne Swan is making no secret of his delight at the latest retail sales figures, hailing a strong rise over the past year in particular.

And the results, which included a 0.3 percentage point rise in April, following a 2.2 per cent rise in March are, indeed, remarkable.

They do, of course, reflect the stimulatory measures that the Federal government has taken, to ward off the worst effects of the global economic crisis on Australian jobs.

There is good reason, though, to be cautious.

And other figures, that the Australian Bureau of Statistics also released yesterday, show that Australia has virtually no chance of avoiding a technical recession, when the March quarter national accounts are released tomorrow.

These figures, which the government barely mentioned at question time in Federal parliament yesterday show that manufacturers’ sales and inventories have  fallen sharply, both in the March quarter and over the year to the end of March.

Company profits also fell sharply in the March quarter, plunging by 7.2 per cent, on seasonally adjusted figures, in that time.

Australian companies, though, still managed to increase their profits, on the same basis, over the year to the end of March, chalking up a 6.8 per cent rise in that time.

That positive figure, though, cut a lonely figure in the Statistician’s business indicators publication for March.

The Reserve Bank board will meet today, to review Australia’s interest rates.

Although most economists expect that the bank will keep its marker rate, of 3 per cent, on hold, there have been hints that it might announce another small cut.

The big test for the government, though, will be the release of the March quarter national accounts tomorrow.

And the Treasurer, clearly, isn’t expecting a great result.

He is saying that Australians should remember, that whatever that result is, it would have been much worse without the government’s stimulatory measures.

Related stories:

1. Recession hits boom State
2. Retail sales fall, but building approvals rise

Australia expected to slide into recession this week

Australians will know by Wednesday whether the Federal government’s stimulus packages have been enough to prevent a technical recession in this country.

That’s when the Statistician will release the March quarter’s national account figures.

As Federal parliament will be sitting this week, that will put the Federal government under great pressure.

Two successive quarters of negative growth make up a technical recession, on the standard definition.

And Australia has already chalked up one such quarter.  The Statistician reported, months ago, that the Australian economy contracted by 0.3 percentage points in the final three months of last year.

By any reasonable standard, Australia is already in recession  And the bureau’s figures are expected to confirm that.

But the Federal Treasurer, Wayne Swan, couldn’t resist the temptation to get in early on this one.

In his latest weekly economic note, Mr Swan said:”The government has taken decisive action to stimulate our economy and cushion Australians from the worst the world can throw at us.”

He said there had been three stages in its stimulus plans, targeting family incomes first, then “shovel ready” projects and finally bigger infrastructure projects.

“The one thing that we know for sure about our first quarter GDP outcome is that, without the government’s substantial economic package, the result would be much worse.”

The coming week will be a big one for the economy.

The Reserve Bank board will be holding its usual monthly meeting tomorrow – and there have been some hints that it might cut Australia’s interest rates again.

Retail trade figures for April will be out today and the Statistician is also planning to release Australia’s balance of payments figure for the March quarter tomorrow along with the nation’s building approval figures for April.

Related stories:

1. Australia half way to recession
2. Australia heads for recession as Japan crashes