australia to miss recession says forecastor, page-8

Not everyone agrees


March 19, 2009 01:23pm
BUSINESS conditions have fallen to their lowest level since the recession of the early 1990s.

A survey of industrial trends for the March quarter showed steep declines in new orders, output, employment and overtime.

The Australian Chamber of Commerce and Industry (ACCI)-Westpac index fell to 34 in the March quarter, from 40.4 in the previous three months. A level below 50 signals a contraction in activity.

ACCI director of industry policy and economics, Greg Evans, said the report showed the impact of a slowing economy starting to take its toll "very heavily'' on Australian business.

"If there are any positive aspects ... general business expectations have now stabilised, albeit at one of its lowest levels,'' Mr Evans said.

The expected composite index for the next quarter edged up by 0.2 points to 34.

"That may be in part due to the impact of the government's fiscal stimulus package, and also continuing easing on behalf of the Reserve Bank.''

Inflation pressures are also easing, he said.

"Given the evident economic weakness, not only in this survey, but more generally in other surveys and in official data, we believe that a strong case exists for the Reserve Bank to loosen monetary policy by at least another 50 basis points at its meeting in early April,'' Mr Evans said.

Westpac senior economist Anthony Thompson said the survey was concluded last week, against the backdrop of rapidly deteriorating global demand and trade, weaker domestic demand and constrained finance.

He said labour demand was deteriorating rapidly, as seen in a 17 points drop in the survey's labour composite index to minus 33, also its lowest level since 1991.

"Historically, that's consistent will jobs growth falling to around minus 2.5 per cent on an annual basis at the end of this year,'' Mr Thompson said.

Perceptions of labour market tightness dropped further to minus 37 per cent, pointing to an unemployment rate of 8 per cent.

"We think that the labour market will be less pessimistic than that,'' Mr Thompson said.

"This is a survey of private sector conditions, and we expect significant public sector support in overall economic growth.''

Westpac expects jobs growth to deteriorate to minus 1.5 per cent to the end of this year, taking the unemployment rate towards seven per cen