Will Australia’s Recovery Stop With Fading Stimulus Package?

In the second quarter of 2009, Australia’s economy grew 0.6% from a year earlier boosted by a significant fiscal stimulus. But is the Australian economy able to keep current pace of expansion once the stimulus wanes?

Indeed, there is no doubt that $A20bn (1.7% of GDP) fiscal stimulus distributed in the period of just 6 months significantly boosted household consumption. For example, retail sales data shows that growth was bigger than average in March, April and May, months when most cash handouts were distributed, Moreover, the government is undertaking infrastructure and construction projects and it is estimated that this year alone, the expenditure on investment by the government will exceed the bonus payments that were made to households in 2009.

However, government spending is not the only engine behind the Australian economy. China’s recovery and improving outlook for other advanced economies are also boosting business confidence among Australian businessmen. For instance, with prices of commodities rising mining companies are slowly rebuilding their balance sheets. So, all of this in conjunction with improving consumer confidence make us believe that Australia has the necessary conditions for a sustainable economic recovery in 2010.

Anna Fedec, contact@tradingeconomics.com
9/16/2009 8:21:54 PM