Australia's Growth May Gain Momentum by the End of This Year

In 2009, unlike many other major economies, Australia recorded year-over-year growth due to a strong banking system and successful monetary and fiscal policy. And although the pace of expansion in the first quarter of 2010 was weaker than expected, the recent surge in commodity prices, improving labor market and strong domestic demand are likely to support sustainable growth this year.

Indeed, during the last few years, foreign trade has been a major factor in Australia's expansion. And after a significant drop in exports in 2009, it has been steady recovering this year. In fact, faster than expected upturn has been possible mostly due to rising demand from China prompted by vast fiscal stimulus. For example, it is estimated that the value of exports to China increased by 31% in 2009. Also, with the global economic recovery commodity contract prices rose significantly bringing Australia’s the much needed capital. Adding to that the possible revaluation of Chinese currency Renminbi and Australia's companies look very well positioned going forward.

Looking further, the influx of capital coming from exports is encouraging business investments and stimulating employment. For example, from March to June 126K jobs were created and it is expected that by the end of 2010 the jobless rate will fall below 5%. Moreover, in June, retail sales rose for fourth consecutive month, as growth in household disposable income (higher wages, more hours worked) and interest rates still below historical standards are supporting customer spending.

Anna Fedec,
8/5/2010 5:48:34 PM