Tuesday, Reserve Bank of Australia's Deputy Governor, Ric Battellino said that the Australian economy is likely to shrink in 2009.

The deputy governor said the measures taken by the government in the form of interest rate cuts would go a long way in offsetting negative influences coming from abroad, but at the same time, the economy could not fully insulate from external shocks.

However, Battellino pointed out that the Australian economy has held up better than most other economies, helped by its disciplined policies and prudent financial behavior. The housing market also was relatively less affected than those in the U.S and the UK.

The deputy governor indicated that the country was in a good position to benefit from the global economic recovery when it comes, as the underpinnings of the Australian economy remained sound.

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