Economy on the mend by Christmas?

The nation's central bank boss has stated that the Australian economy will start getting better by Christmas, but that the recovery from the recession will be slow.

Unpublished forecasts from the International Monetary Fund have predicted that Australia's emergence from the recession will be less robust than Treasury predictions published on budget night.

Economists have stated that Mr. Stevens expectation of a return growth later this year can only mean that the Reserve Bank will not cut interest rates again.

Mr. Stevens informed the Canadian-Australian Chamber of Commerce, in a speech recently that Australia's recovery would be gradual from the end of 2009; he did not however offer his own set of detailed economic growth forecasts. He further suggested that it was too soon to say that this was the beginning, and added that recent developments were consistent with the view that a recovery would commence at the end of 2009.

Most observers are of the opinion that any new global expansion will be accompanied by relatively slow growth.

Treasury forecasts predict that the Australian economy will grow by 4.5 per cent from 2012. An article in The Australian, states that IMF staff estimates are more conservative, forecasting a growth pace capped at three per cent between 2012 and 2014. Treasury predicted a growth of 2.25 per cent pace for 2011 but the IMF is expecting a more modest expansion of 1.9 per cent.

Mr. Stevens stated that the Reserve Banks forecasts were not that different over a two year period.

Craig James Commonwealth Securities chief economist felt that Mr. Stevens' comments that rates were pretty low indicated that rates would be left on hold, and that any further rate cut at this time would possibly damage fragile confidence levels than stimulate growth further.

Published on May 5-th, 2009 in Financial Planning
Damon Rasheed is the CEO of Rate Detective, an Australian financial service comparison sites specialising in Life Insurance, Income Protection Insurance and home loans. Damon holds a Master's Degree in Economics from the University of Melbourne and has been involved in many start-up internet businesses.