Country Report Australia October 2009

Outlook for 2010-11

• The popular Labor Party prime minister, Kevin Rudd, will have to defend his government from opposition criticism of its economic management as public debt rises in 2010, but he is unlikely to lose the next general election.
• Mr Rudd may call an early general election (it is currently due at the end of 2010) if upcoming legislation on carbon emissions is blocked by the Senate (the upper house of parliament).
• Occasional diplomatic disputes with China are likely, but it is doubtful that they will disrupt the bilateral trade relationship.
• The fiscal budget is expected to remain firmly in deficit in 2010-11, but economic recovery will bolster revenue collection and the government's stimulus spending is scheduled to be steadily withdrawn.
• The Reserve Bank of Australia (RBA, the central bank) will slowly raise its official cash rate in 2010-11 to prevent an acceleration in inflation as the economy recovers.
• The Economist Intelligence Unit has raised its real GDP forecasts. We now expect the economy to grow by 1.7% in 2010, compared with 1.2% previously. Economic growth will accelerate to 2.4% in 2011.

Monthly review

• The Liberal-National opposition coalition is pressuring the government to reduce stimulus spending in order to contain debt, arguing that spending should be curtailed in the light of better than expected economic conditions.
• In late September the minister for climate change and water, Penny Wong, stated that the government was willing to discuss amendments to its climate change legislation if the opposition coalition can agree on a unified stance.
• A director of the Foreign Investment Review Board stated in late September that the government prefers foreign holdings in major Australian mining firms to be kept below 15% and below 50% for undeveloped projects.
• The government is planning to introduce legislation that will require a previously state-owned firm that remains the market leader in the telecoms sector, Telstra, to structurally separate its retail and wholesale operations.
• The RBA raised its cash rate by one-quarter of a percentage point, to 3.25%, on October 6th.
• Australia's economy grew by a seasonally adjusted 0.6% quarter on quarter in the second quarter of 2009, up from 0.4% in the first quarter.
• The Westpac-Melbourne Institute's consumer sentiment index rose by 5.2% in September to stand at its highest level since July 2007.

Source: Country Report

This report covers the following industry codes:
SIC Code: 60
NAICS Code: 52