Identifier
Created
Classification
Origin
09CANBERRA519
2009-06-03 06:58:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Canberra
Cable title:
SURPRISE, AUSTRALIA NOT IN RECESSION
how-toVZCZCXRO9043 PP RUEHPT DE RUEHBY #0519 1540658 ZNR UUUUU ZZH P 030658Z JUN 09 FM AMEMBASSY CANBERRA TO RUEHC/SECSTATE WASHDC PRIORITY 1568 INFO RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY RUEHWL/AMEMBASSY WELLINGTON 5807 RUEHJA/AMEMBASSY JAKARTA 5456 RUEHGP/AMEMBASSY SINGAPORE 1744 RUEHKO/AMEMBASSY TOKYO 3562 RUEHUL/AMEMBASSY SEOUL 9816 RUEHBJ/AMEMBASSY BEIJING 9492 RUEHBN/AMCONSUL MELBOURNE 6390 RUEHPT/AMCONSUL PERTH 4654 RUEHDN/AMCONSUL SYDNEY 4615
UNCLAS CANBERRA 000519
SENSITIVE
SIPDIS
STATE FOR EAP/ANP AND EEB; STATE PLEASE PASS USTR/BISBEE
E.O. 12958: N/A
TAGS: ECON EFIN AS
SUBJECT: SURPRISE, AUSTRALIA NOT IN RECESSION
REF: CANBERRA 452
UNCLAS CANBERRA 000519
SENSITIVE
SIPDIS
STATE FOR EAP/ANP AND EEB; STATE PLEASE PASS USTR/BISBEE
E.O. 12958: N/A
TAGS: ECON EFIN AS
SUBJECT: SURPRISE, AUSTRALIA NOT IN RECESSION
REF: CANBERRA 452
1. (U) Summary: National accounts today showed seasonally
adjusted growth of 0.4% in March quarter, largely driven by
imports and exports; private business investment remains
weak. This result defied the conventional wisdom that the
accounts would show Australia in recession. The Rudd
Government claims its economic stimulus was a big factor, but
says tough times are still to come. End summary.
BETTER THAN EXPECTED
2. (U) Australian Bureau of Statistics (ABS) figures released
today (June 3) showed growth for the March quarter of 0.4%
seasonally adjusted (1.6% annualized). Trend growth for the
March quarter was down 0.1%, but the seasonally adjusted
numbers are the ones making headlines. The ABS found that
the main positive contributors to the growth were imports
(1.6 percentage points),exports (0.6 points),and household
final consumption (0.3). The biggest net drag on growth was
private business investment (minus 1.1 percentage points);
total capital formation was down 4.8% for the quarter, and
total investment in dwellings dropped 4.5%. Domestic demand
declined 1.0% for the quarter, non-farm GDP was down 0.5%
(trend),and real domestic income declined 1.4%.
3. (U) In his statement on June 2 announcing no change in
interest rates (cash rate remains 3.0%),Reserve Bank (RBA)
chief Glenn Stevens said as he has since April that the
Australian economy is in contraction, but said better
conditions in global financial markets and other evidence of
stabilization of the international economy were improving
Australian prospects.
4. (U) This was a surprise. Observers nearly unanimously
expected negative growth for the quarter, and even Prime
Minister Rudd and Treasurer Wayne Swan had been using the
word "recession" in recent weeks.
REACTION
5. (U) Response to the ABS news was immediate. Rudd said the
national accounts showed the GOA's economic stimulus program
was working, and asserted that absent that such a focused and
quick government response (over A$50 billion/US$40 billion
since September) Australia would be in recession. Rudd
stressed however that tough times were still ahead and that
unemployment could be expected to continue to rise.
Opposition Leader Malcolm Turnbull complained that many
sectors remain weak. Economists have emphasized the weak
corporate sector results and the decline in demand as
concerns that will foreshadow dropping profits and further
job losses.
6. (SBU) Comment: Whether in a technical recession or not,
Australia's economic performance remains weak, with growth
for the 12 months ending March 31 at 0.4% and unemployment at
5.4% and expected to rise when new figures are released next
week. Still, this is a performance that would be the envy of
most other OECD economies. When the budget was announced in
May (ref A),many criticized Swan for being too optimistic in
predictions for growth. But a few observers thought the GOA
was low-balling the economy's short-term prospects to collect
the political pay-off when things turned out better than
expected; Virgin Blue government relations chief Tony
Wheelens, who has good relations with the Rudd Government,
QWheelens, who has good relations with the Rudd Government,
made exactly that point to econoff shortly after the budget's
release. Whether planned calculation or fortuitous
happenstance, this is a bright spot for the economy and the
Rudd Government.
CLUNE
SENSITIVE
SIPDIS
STATE FOR EAP/ANP AND EEB; STATE PLEASE PASS USTR/BISBEE
E.O. 12958: N/A
TAGS: ECON EFIN AS
SUBJECT: SURPRISE, AUSTRALIA NOT IN RECESSION
REF: CANBERRA 452
1. (U) Summary: National accounts today showed seasonally
adjusted growth of 0.4% in March quarter, largely driven by
imports and exports; private business investment remains
weak. This result defied the conventional wisdom that the
accounts would show Australia in recession. The Rudd
Government claims its economic stimulus was a big factor, but
says tough times are still to come. End summary.
BETTER THAN EXPECTED
2. (U) Australian Bureau of Statistics (ABS) figures released
today (June 3) showed growth for the March quarter of 0.4%
seasonally adjusted (1.6% annualized). Trend growth for the
March quarter was down 0.1%, but the seasonally adjusted
numbers are the ones making headlines. The ABS found that
the main positive contributors to the growth were imports
(1.6 percentage points),exports (0.6 points),and household
final consumption (0.3). The biggest net drag on growth was
private business investment (minus 1.1 percentage points);
total capital formation was down 4.8% for the quarter, and
total investment in dwellings dropped 4.5%. Domestic demand
declined 1.0% for the quarter, non-farm GDP was down 0.5%
(trend),and real domestic income declined 1.4%.
3. (U) In his statement on June 2 announcing no change in
interest rates (cash rate remains 3.0%),Reserve Bank (RBA)
chief Glenn Stevens said as he has since April that the
Australian economy is in contraction, but said better
conditions in global financial markets and other evidence of
stabilization of the international economy were improving
Australian prospects.
4. (U) This was a surprise. Observers nearly unanimously
expected negative growth for the quarter, and even Prime
Minister Rudd and Treasurer Wayne Swan had been using the
word "recession" in recent weeks.
REACTION
5. (U) Response to the ABS news was immediate. Rudd said the
national accounts showed the GOA's economic stimulus program
was working, and asserted that absent that such a focused and
quick government response (over A$50 billion/US$40 billion
since September) Australia would be in recession. Rudd
stressed however that tough times were still ahead and that
unemployment could be expected to continue to rise.
Opposition Leader Malcolm Turnbull complained that many
sectors remain weak. Economists have emphasized the weak
corporate sector results and the decline in demand as
concerns that will foreshadow dropping profits and further
job losses.
6. (SBU) Comment: Whether in a technical recession or not,
Australia's economic performance remains weak, with growth
for the 12 months ending March 31 at 0.4% and unemployment at
5.4% and expected to rise when new figures are released next
week. Still, this is a performance that would be the envy of
most other OECD economies. When the budget was announced in
May (ref A),many criticized Swan for being too optimistic in
predictions for growth. But a few observers thought the GOA
was low-balling the economy's short-term prospects to collect
the political pay-off when things turned out better than
expected; Virgin Blue government relations chief Tony
Wheelens, who has good relations with the Rudd Government,
QWheelens, who has good relations with the Rudd Government,
made exactly that point to econoff shortly after the budget's
release. Whether planned calculation or fortuitous
happenstance, this is a bright spot for the economy and the
Rudd Government.
CLUNE