Australia avoids recession as economic growth returns
The Australian economy has avoided recession and is "through the worst" of the global financial crisis, according to Australian Bureau of Statistics (ABS) data.
The ABS reported that the economy grew by 0.4 percent in the first three months of 2009, defying international trends and debunking Prime Minister Kevin Rudd's April prediction that a recession was "inevitable".
A recession is defined as two consecutive quarters of negative economic growth. The economy shrank by 0.5 percent in the final quarter of 2008.
Economists said the result showed that government spending had supported the economy and that the weaker Australian dollar in Q1 had supported strong export growth.
"It is an encouraging sign," Riki Polygenis, economist at ANZ told ninemsn. "It shows that the economy has been responding to fiscal stimulus and lower interest rates."
Australia is the only industrialised country in the world except South Korea to record economic growth in the first three months of this year.
The unexpected result means that Australia may now be "through the worst" of the financial crisis that has caused huge slumps in economic growth across the world.
"Other economies have turned in depressingly large declines in their Q1 growth numbers," said Michael Blythe, chief economist at Commonwealth Research, before the release of the figures. "Real GDP fell by 1.6 percent in the US, 4 percent in Japan, 1.9 percent in the UK and 3.8 percent in Germany."
However, Ms Polygenis warned that the economy may not be out of the woods yet.
"There are some reasons to be cautious," she told ninemsn. "Domestic demand contracted in the first quarter and there was a big contribution from exports, largely because net imports collapsed."
The Australian dollar rose sharply after the news on expectations that the return of economic growth will lessen the need for further interest rate cuts from the Reserve Bank of Australia, which yesterday left rates on hold at 3 percent.
A slew of recent economic data has pointed to a recession as business investment slumps and unemployment rises. However, data released yesterday had economists rushing to update their forecasts for today's growth figures.
The ABS reported yesterday an unexpected narrowing of Australia's current account deficit with the deficit falling to $4.6 billion during the first quarter of the year, from $6.35 billion in the final quarter of 2008.
The deficit on goods and services, meanwhile, fell by nearly $6 billion in the first quarter.
Story by By Stuart Fagg, ninemsn Money
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