The global economic downturn has pushed Australia's economy into its first recession since 1991, Reserve Bank of Australia Governor Glen Stevens said Tuesday. At the same time, he expressed confidence in the country's long-term prospective.
Speaking at the Australian Institute of Company Directors in Adelaide Stevens said, Whether or not the next GDP statistic, due in early June, shows another decline, I think the reasonable person, looking at all the information available now, would come to the conclusion that the Australian economy, too, is in recession.
It is very rare for Australia to escape an international downturn and there is no precedent for avoiding one of this size, he said.
Stevens' remarks coincided with Australian Prime Minister Kevin Rudd's promise to provide a third economic stimulus package in next month's federal budget. A day earlier, Rudd said for the first time, the country's economy is heading for a recession, which is inevitable amid the current global downturn.
Stevens said the effects of stimulus measures taken by both the government and the central bank will still be coming through for some time yet. In April, the central bank lowered its key interest rate by 25 basis points to a 49-year low of 3%, its eighth reduction since last September.
The RBA chief noted that the long-term prospects for growth are sound and the economy may recover and be in a better shape than most other economies. Australia's genuine long term economic prospects remain good, and there remain good grounds to think that we will continue to weather the storm better than most.
So far, the economy contacted 0.5% in the December quarter after rising 0.1% in the September quarter.
Moreover, he said it is probably not entirely coincidental that the clearest signs of a turning point in economic activity appear to be accumulating in China, though not exclusively there.
Also on Tuesday, minutes from the board's April 7 monetary policy meeting revealed that the RBA board members are of the view that the outlook for near-term demand to be weaker - but they still believe recovery to be likely by the end of 2009.
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