Fed Bursts Australia’s Economic Boast in One Blog Post
Fed Bursts Australia’s Economic Boast in One Blog Post
(Bloomberg) --
Australia’s fierce pride in chalking up a record 28 recession-free years has just taken a battering from the Federal Reserve.
Analysis from the St. Louis branch of the U.S. central bank questions whether Australia’s ability to dodge two straight quarters of economic contraction in almost three decades should be held in such high regard. That’s because Australia has actually had three recessions in that period when looking at gross domestic product on a per capita basis, the report says.
“Should we use Australia as a benchmark when thinking about possible duration of expansions?” senior economist Paulina Restrepo-Echavarria wrote in a blog post. “If so, we have to take it with a grain of salt because looking at just GDP growth doesn’t paint the whole picture.”
Restrepo-Echavarria rightly points out that population growth has been a major factor in Australia’s record expansion. That, along with resources exports, has helped keep the recession wolf from the door. However, the average consumer isn’t feeling so wealthy and the economy is growing at the weakest pace in a decade -- even slower than the country’s 1.6% rate of population increase.
Lawmakers prize the economy’s unbroken growth record as a treasured political trophy, with Treasurer Josh Frydenberg earlier this month talking up the milestone as he downplayed limp second-quarter economic data.
Reserve Bank of Australia Governor Philip Lowe has reiterated there may be reasons for optimism, saying the economy appeared to have reached a “gentle turning point” and there would likely be some moderate growth ahead.
Still, Frydenberg is holding off from additional fiscal stimulus as the government focuses on returning the budget to black, and most economists expect Lowe to cut interest rates for the third time in five months on Tuesday to insure against global and domestic headwinds.
To contact the reporter on this story: Chris Bourke in Sydney at cbourke4@bloomberg.net
To contact the editors responsible for this story: Nasreen Seria at nseria@bloomberg.net, Shamim Adam, Teo Chian Wei
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