Country Report Australia April 2009

Outlook for 2009-10

• The popular Labor Party prime minister, Kevin Rudd, faces a tough year as the economy goes into recession, and will have to defend his government from opposition criticism of its economic management.
• Recently introduced economic measures should ensure that Australia has to endure only a shallow recession, but the government may still have to pay a political price at the next general election, which is likely to be held in 2010.
• Mr Rudd shares some policy views with the new US president, Barack Obama, and this should help to improve relations between the two countries.
• The fiscal budget is expected to go into deficit in 2009-10 as economic weakness depresses revenue collection and the government continues to spend to stimulate the economy.
• The Reserve Bank of Australia (the central bank) will continue to cut interest rates, with the official call rate set to fallto 2% by the end of 2009.
• The Economist Intelligence Unit forecasts that real GDP will contract by 1.6% in 2009, owing to the gloomy outlook for global growth and strains in the domestic economy.
• The Australian dollar will weaken in 2009-10, owing to lower commodity prices, falling domestic interest rates and high levels of risk aversion among global investors.

Monthly review

• New worker-friendly industrial-relations legislation was passed by the Senate (the upper house of parliament) on March 20th after prolonged negotiation with minor parties and independent senators.
• Polls of voting intention held in late March show Labor maintaining its 12-percentage-point lead over the opposition Liberal-National coalition.
• The treasurer, Wayne Swan, has rejected a A$2.6bn (US$1.7bn) takeover bid by a Chinese state-owned firm, China Minmetals, for a financially troubled Australian mining company, OZ Minerals, on national security grounds.
• The federal government has agreed to guarantee around A$170bn in state government debt, making it easier for state governments to borrow.
• The unemployment rate jumped to 5.2% in February, from 4.8% in January.
• Recent indicators of confidence, consumer spending and housing activity have all continued to paint a bleak picture of the state of the economy.
• The number of approvals for the construction of new dwellings was down by 3.7% in January, equating to a year-on-year fall of 33.5%.

Source: Country Report

This report covers the following industry codes:
SIC Code: 10;47;70
NAICS Code: 212;48;11;72