Australia: back into boom-time

After a slip last quarter, the economy has rebounded.  Or has it?

Phew!, I should think Julia Gillard would have said to Wayne Swan today. The PM is in Auckland for the Pacific Forum, but in Canberra the Treasurer had good news to celebrate. The BBC reported "Gross domestic product (GDP) rose by 1.2% in the three months to the end of June from the previous quarter, the statistical bureau said. That compares with a contraction of 0.9% in the first three months of the year. Analysts said demand for resources should help Australia's economy continue to grow. "The expectation is for this improvement trend to continue," said Peter Esho of City Index in Sydney."

The world's press was ecstatic, at last able to report positive news. AFP said "The Australian dollar surged on the news to 1.0603 US cents from 1.0527, and the stock market also rallied, closing 2.65 percent higher." And Bernama reported exuberant and cheery comments of Treasurer Swan that renewed growth showed the underlying strength in the economy.

We all need cheering up. As the US dives deeper into debt and shows every sign of dicing with a double-dip, Germany stagnates and the Eurozone struggles, Australia's return to growth demonstrates its customer demand is strong. And that means China's demand of hard commodities to fuel infrastructure development hasn't slackened yet, as some pundits foresaw.

Investors in Australia will be relieved. However, this is a "boom and gloom", two-speed, bipolar economy, according to a BBC report only yesterday.  Manufacturing, retail, education and tourism sectors are all in the doldrums while mining races ahead. "It is between the resources sector and the rest" Heather Ridout, CEO of the Australian Industry Group, an employers club, told the BBC.

Australian consumers won't be jumping for joy just yet then. There's not much of a feel-good factor around it appears.  This has translated into a house-price downturn of 1.9% over the past year in the big eight cities, and historically low support levels for the current government. Recent polls have Julia Gillard trailing both Tony Abbott, the Opposition leader, and Kevin Rudd, her Labour predecessor as PM.

It seems these latest growth figures won't boost the Federal government's prospects. I suppose the question for them is what if anything can be done to energise the non-resources sectors?  Stimulous packages are unfashionable right now and, with the global economy in such a precarious place, will these sectors remain listless for a while longer yet?

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1 comment:

  1. Tasmania is in he doldrums because of federal funding GST cuts. Due to mindless spending and the creation of huge bureaucracies in the past few years, education and health have bear the brunt of cuts. Twenty schools are to be closed by the end of the year, 1,500 public servants will be sacked and many front-line staff in hospitals are being reduced to perilously low levels. Yet Western Australia is thriving at the expense of other states. Wen all the metal is retrieved from the soil their economy will collapse.