Australia avoids recession ... for the time being

By Rod McGuirk  |   2009-6-4  |     NEWSPAPER EDITION

AUSTRALIA'S economy unexpectedly eked out growth of 0.4 percent in the first quarter from a year ago, one of the few major advanced economies to avoid a recession amid the global slump.

The government claimed its stimulus package lifted the economy, with household spending and exports rising even as business investment sank.

Prime Minister Kevin Rudd welcomed the modest growth figures, saying Australia was the only major advanced economy that was not in recession - usually defined as two straight quarters of economic contraction. Gross domestic product had shrunk 0.6 percent in the fourth quarter.

Rudd credited the billions of dollars in cash handouts the government has given to most Australians since last year but cautioned about the outlook.

"We're not out of the woods yet. We've got a long way to go," he said.

The figures buoyed stocks, with the market's benchmark S&P/ASX 200 index rising 1.6 percent to 4,017.89.

For the fiscal year through March, the economy grew just 0.4 percent - the lowest annual growth rate since 1991.

JPMorgan economist Helen Kevans said the outlook for the next few quarters was not rosy. "We have technically avoided recession, but if you look at the details in the data it is not a pretty picture," she said. "We have imports falling off a cliff, which is a symptom of firms smashing investment and which is bad for our employment outlook."

The government plans to increase Australia's budget deficit from A$58 billion (US$47.5 billion) in the current fiscal year to A$188 billion over four years.