Australia's economy expanded at its weakest pace in eight years in the third quarter of 2008. Exports which has been the main driver of Australia's growth in the last few years are deteriorating month by month since lower commodity prices and slowing global demand are no longer offset by a the weakening currency. In addition, the unemployment rate rose to 4.5 percent in December, the highest in almost two years, as mining companies, airlines, and automakers fired full-time workers.
Australia is actively fighting the recession in two fronts. Prime Minister Kevin Rudd has announced almost A$45 billion in aid for families, pensioners, bond markets, home buyers, and extra spending on schools and roads. In addition, the interest rate reductions with more to come are likely to broader financial conditions, fuel the household demand and stimulate the cyclical recovery at the end of the year. Only the future can tell if these measures will work out.