Australia will have modest positive economic growth in 2009, according to a key United Nations economic survey of Asia and the Pacific.
The UN’s Economic and Social Commission for Asia and the Pacific (UNESCAP) painted a grim picture for the region overall in the wake of the global financial crisis.
The annual survey said the Australian economy “is not immune to the global recession any longer”, despite sustaining 18 years of growth in 2008. “While fiscal and monetary policy measures are expected to help ease the deterioration of consumer confidence and ease the downward pressure on household consumption, economy is forecasted to weaken significantly in 2009 to 0.5 per cent growth (from 2.4 per cent in 2008),” a country note accompanying the report said. “With recessionary pressures and fall of commodity prices, inflation rate is forecasted to be contained, to 3.1 per cent in 2009, down from 4.4 per cent in 2008.”
The survey forecast the New Zealand economy would contract by one per cent through the year “as export demand from the major trading economies remains weak”.
But depreciation in both the Australian and New Zealand dollars was expected to “cushion the impact of slower export growth”, while imports would be less in demand. For both Australia and New Zealand, government policies including economic stimulus packages would be the key means to “help restore consumer confidence and ease the downward pressure on household consumption”, it said.
The Australian government has implemented two economic stimulus strategies since December – a $A10.4 billion plan along with a $A42 billion nation-building and jobs plan.
In New Zealand, the stimulus package totals $NZ500 million covering infrastructure, transport spending and housing.
While Australia’s mining sector had bolstered business confidence in 2008, the uncertainties were now undermining the outlook. “While the mining sector has been largely insulated from the financial crisis so far, tighter credit and the rising cost of equity funding, combined with falling commodity prices are likely to discourage future investment,” the report said.
It said the Asia Pacific economic outlook had “darkened” since the last quarter of 2008, as the global economy faced more financial turbulence than was anticipated.
A credit crunch, along with financial deleveraging, had choked off economic activities, the survey said.
UNESCAP executive secretary Noeleen Heyzer said the Asia Pacific was facing a triple threat. “The world’s attention is currently focused on the financial crisis but there are also two other crises that we faced in 2008, that of the energy food security and natural disasters in the context of climate change,” Heyzer said.
She said both threatened the gains that had been achieved in the stgelopment of the region. The three crises had now converged and “unless they were addressed we would lose stgelopment progress much further”. The survey said Asia Pacific countries were experiencing sharp reversals in the growth achieved over 2002 to 2007, “with the worst yet to come”.