Identifier
Created
Classification
Origin
08CANBERRA1215
2008-12-03 23:46:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Canberra
Cable title:  

AUSTRALIA BARELY AVOIDS NEGATIVE GROWTH

Tags:  ECON EFIN AS 
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VZCZCXRO7939
PP RUEHPT
DE RUEHBY #1215 3382346
ZNR UUUUU ZZH
P 032346Z DEC 08
FM AMEMBASSY CANBERRA
TO RUEHC/SECSTATE WASHDC PRIORITY 0611
INFO RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY
RHEHNSC/NSC WASHINGTON DC PRIORITY
RUEHWL/AMEMBASSY WELLINGTON 5542
RUEHDN/AMCONSUL SYDNEY 4017
RUEHBN/AMCONSUL MELBOURNE 5807
RUEHPT/AMCONSUL PERTH 4077
UNCLAS CANBERRA 001215 

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ECON EFIN AS
SUBJECT: AUSTRALIA BARELY AVOIDS NEGATIVE GROWTH

REF: A. A) CANBERRA 1036

B. B) CANBERRA 1208

UNCLAS CANBERRA 001215

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ECON EFIN AS
SUBJECT: AUSTRALIA BARELY AVOIDS NEGATIVE GROWTH

REF: A. A) CANBERRA 1036

B. B) CANBERRA 1208


1. (SBU) Summary. Australia's economy grew by less than 0.1%
in the September quarter; excluding farms, the economy
contracted 0.3%. Despite the fiscal stimulus package and
aggressive interest rate cuts, contraction in the current
quarter and recession in 2009 seem likely. End summary.

LATEST ECONOMIC FIGURES POOR


2. (U) On December 3, Australia's Bureau of Statistics
released its figures for the quarter ending September 30.
Australia kept on the positive side, barely. GDP growth for
the quarter - most of which preceded the collapse of Lehman
Brothers and the intensification of the global financial
crisis - was a scant 0.06%. Excluding Australia's farm
sector (where wheat output following good rains was up
14.9%),the economy actually contracted 0.3% on the quarter.
This was the weakest quarter for the non-farm economy since
the goods and services tax (GST) was introduced in late 2000.


GOA PUTS POSITIVE FACE ON DATA


3. (U) Treasurer Wayne Swan put a brave face on the numbers,
calling them a "positive outcome" given the "rapidly
deteriorating global environment." Swan noted that growth
for the year through September was still at 1.9%, compared to
slowing around the world. In his statement, he said the
explosion earlier this year at the natural gas plant on
Varanus island in Western Australia, which disrupted exports,
shaved 0.25% from GDP growth.

NEXT?


4. (SBU) Swan admitted that Australia cannot entirely avoid
the impact of international economic forces, but said
Australia remained better placed than most countries to face
the global financial crisis. With some justification -
Australia still has room to cut interest rates (ref B),and
although it appears likely to slide into a budget deficit
next year, it at least began this cycle with a strong
budgetary surplus, much of which went into the fiscal
stimulus package (ref A) that goes into effect next week.
Many observers expect that Australian GDP will decline in the
current quarter, despite the fiscal stimulus package and the
Reserve Bank of Australia,s (RBA) aggressive interest rate
cuts. One banker told econoff that he expects the credit
crunch to hit the Australian economy hard. Global recession
(generally accepted as already under way by Australian
economists) will hit Australia's terms of trade and reduce
national income, despite the aggressive GOA and RBA moves.


5. (SBU) Comment: Although the GOA continues to stick to its
predictions of growth for next year, more and more observers
are predicting a recession for 2009. The weakness in
Australia,s top trading partners (China, Japan, United
States, EU, New Zealand),declining commodity prices, and the
reduction of available credit, will significantly reduce
Australian growth for 2009. It is possible Australia will
not have two consecutive quarters of GDP decline thus
technically avoiding recession, but a poor 2009 economic
performance appears inevitable. End comment.

MCCALLUM