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Growth expected to hit 6yr low

Posted December 3, 2008 07:31:00
Updated December 3, 2008 08:22:00

Hitting the brakes: New figures are expected to show the economy slowing again (ABC News: Giulio Saggin, file photo)

Economists are expecting official figures out today to show there is been a marked slowing in annual economic growth.

The figures are tipped to show the economy expanded by 0.2 per cent in the September quarter, to take the annual growth rate to just 1.9 per cent.

That would be the economy's slowest annual growth rate in six years.

Westpac chief economist Bill Evans says flagging consumer spending has been the biggest detractor from economic growth.

"It's really been the impact of very high interest rates in the second half of last year and the first half of this year that's been the major drag on consumer spending," he said.

"Given consumer spending's about 60 per cent of overall economy, it's been that factor that's been the main drag on these growth numbers."

He says dramatic interest rate cuts, lower petrol prices and the Government's economic stimulus package will help save the economy from recession.

Mr Evans says he does not expect the annual growth rate to bottom out until mid-next-year.

"We think it will be down to around 1.5 per cent, but we would expect to see some moderate pick up from that point," he said.

And he says a recession is definitely not a foregone conclusion for Australia if the figures show a contraction.

"The last time we had a negative was the fourth quarter of 2000 and the media got hold of it and called 'recession, recession, recession'," he said.

"The Westpac Consumer Sentiment Index fell 13 per cent and it was very, very destructive.

"I really don't want to see that happen today because it is a backward looking number. It's not reflecting all the stimulus that the economy has received since the September quarter finished."

Treasurer Wayne Swan would not speculate on the figures this morning but says slow world growth will have an impact.

"We've made it very clear in terms of the world outlook that world growth is certainly slowing, probably slowing substantially, and that certainly will have an impact on Australia's economy," he said.

Tags: business-economics-and-finance, economic-trends, international-financial-crisis, australia

Comments (46)

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• Truebelieveritus:

  03 Dec 2008 9:01:07am

  Vote Labor....and then it's all up hill from there.
  
  Happens all the time and you can set your watch by it.
  
  What is it that Peter Garrett says?......"Short memories"

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  • Remark:

    03 Dec 2008 9:12:50am

    Seems you have forgotten Treasurer Howard's recession of the early 1980s, the worst recession since the Great Depression.
    
    He took unemployment, inflation and interest rates into double figures, the only Treasurer in history to have achieved all three simultaneously. He left office with all three indicators going downhill, plus a whopping budget deficit.
    
    And what did he hand over after the 2007 election? Rising inflation, rising interest rates and a dysfunctional industrial relations system.

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    • cu:

      03 Dec 2008 9:17:41am

      Remark, stop being a has been! What Howard did then and what he did last year has nothing to do with this story, although since you want to go there, I believe if he was in govt. this year we would be sailing through this situation a lot beter than we are.

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      • Oscar:

        03 Dec 2008 9:26:03am

        "...I believe if he was in govt. this year we would be sailing through this situation a lot beter than we are.."
        
        That's the thing about dogma - it all boils down to what you want to believe and the facts can take a hike!
        
        Why not back up your belief with some hard info? The reality is that we are not travelling too badly in the current the global economic climate and certainly far better off than the USA, the UK, and Iceland.
        
        And why not tell us what you believe Howard and Co would have done differently to make things better than they are? If Malcolm T is anything to go by they would be hidebound by a lack of imagination and intestinal fortitude.

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      • cu:

        03 Dec 2008 10:19:51am

        Firstly, I dont blame the global economic problems on our govt.!
        I can only compare to last year. The economy was doing fine.
        The MOST important difference would have been, John Howard would not have paniced. It would have been steady as you go which would have led to more consumer confidance. He wouldnt have spoken of 'threats to National Security'. He wouldnt have chopped and changed his mind with a big frown on his face or looked nervous like the current treasurer.
        He wouldnt have spoken of bank guarantees except if he had thought it out first.
        We have seen many blunders this year from the current govt. and all they have done is blame the opposition.

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      • peter69:

        03 Dec 2008 9:35:40am

        it does have to do with the myth that Truebelieveristus is talking about though, and Remark is correct in regards to the Fraser/Howard years (FYI I don't vote ALP).
        
        Banks play more of a role than government in world economy.
        
        They lent to people who could never pay it back and thats the facts. All a government can do is take preventative action to stop a recession. ALP are doing this.. we'll see in the longer term whether they got it right.

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      • Roy:

        03 Dec 2008 9:44:30am

        Right, so it's ok for Liberal supporters to repeatedly mention the records of previous Labor governments but if Labor people start mentioning some of the actual figures under previous Liberal governments then they get told to "stop being a has-been".
        
        As for Australia "sailing through this situation" under Howard, you're kidding yourself aren't you? We'd be in the same position regardless of who's at the helm.

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    • Baz:

      03 Dec 2008 9:30:32am

      How far back do you have to go to find something to whinge about - 30 years. We don't have to go back that far if we want to look at labor failures.
      
      In any case, the Howard Government did not leave a deficit, they left huge surpluses which the Rudd Government are now spending, inflation may have been rising but it was not out of control and interest rates were still historically low (I was paying off a mortgage during the Hawke/Keating years at 16.5%).
      
      Since the election of the Rudd Government, interest rates may have come down and inflation has proven it never was the problem that the Rudd Government told everybody it was (the inflation genie is out of the bottle was the quote I remember).
      
      My superannuation has halved - I can tell you I know when I was better off and it is not in these current times.

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      • Remark:

        03 Dec 2008 9:48:49am

        "inflation may have been rising but it was not out of control and interest rates were still historically low"
        
        --
        
        The Liberals took inflation to among the highest of any western country - higher than the US, higher than most European countries.
        
        They took interest rates to the second highest in the developed world - after promising to "keep them at record lows".
        
        They left office with a record Current Account deficit, six years of trade in the red (despite the boom in mineral exports), the highest levels of personal debt in the world, and among the developed world's highest rate of workforce casualisation (job and income insecurity + underemployment).

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      • Pen Pal:

        03 Dec 2008 10:14:48am

        Remark - the Current Account deficit was a symbol of our economic well-being by importing all sorts of luxury goods for increasing standards of living.
        
        I notice the Current Account balance is now in our favour which says to me our standard of living has plummeted and falling.
        
        The Current Account is not Government debt as the Labour Party left in 1996 of $96bn. (How many naughts is $96bn?)

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      • Remark:

        03 Dec 2008 10:32:50am

        Pen Pal, the Current Account deficit is not an unreservedly good sign. It is a sign of a sick economy that is losing the trading race in a big way.
        
        Even during the mining boom (the biggest since the Korean War), Australia traded in the red for six years under the Liberals.
        
        Foreign debt almost tripled in Howard's time, despite his pre-election promise in 1996 that tackling the problem would be his government's first priority.
        
        Australian personal debt levels are among the highest on earth, a achievement reached under a Liberal government. A very unhealthy situation indeed.
        
        Household savings also at near-record lows.
        
        http://www.aph.gov.au/LIBRARY/pubs/RP/2007-08/08rp04_4.gif

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      • redexile:

        03 Dec 2008 10:17:30am

        "They took interest rates to the second highest in the developed world "
        
        Errr, no that was the RBA actually! And with good reason as it's given them plenty of room to move and drop them when needed to stimulate peoples back pockets, unlike the US and UK who didnt have that leeway in their interest rates to do what the RBA is now doing, independently of governments (and banks it would appear!) Granted though the promise to keep interest rates low and lower than labour was really dumb politicking from a desperate man

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      • MT:

        03 Dec 2008 10:11:23am

        Deficits are a good idea when the economy is slowing, they help smooth out the business cycle. It is unfortunate that the Howard government frittered away much of the surpluses that were inevitable during the boom times

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    • Pistol Knight:

      03 Dec 2008 9:38:41am

      You seem to forget quite conveniently about a much deeper and longer recession about a decade later. The recession Australia had to have. Don't mention the war.
      

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      • Smaug:

        03 Dec 2008 9:54:41am

        "The recession Australia had to have"
        
        Umm, yes, we did have to have that recession because the Liberal party did NOTHING to change the Australian economy in the 50's, 60's and 70's and we risked becoming a "Banana republic" if something wasn't done.
        Keating and Hawke restructured the economy, we had the recession we had to have in the late 80's and proceeded to have a 16 year boom.
        Unfortuately the last term of the Howard government was so profigate in their spending that instead of being fully cashed up with a huge surplus and good infrastructure they did their best to spend the lot so we are left with cumbling infrastucture and a modest surplus because Howard couldn't spend it all.

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      • Mark:

        03 Dec 2008 10:02:04am

        Why would the Liberal Party have done anything in the 50's and 60's? That period isn't referred to as the golden age for nothing.

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      • Remark:

        03 Dec 2008 10:15:05am

        "50's and 60's? That period isn't referred to as the golden age for nothing"
        
        ----
        
        The time when workforce unionisation in Australia was at a record high.

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  • chalkie:

    03 Dec 2008 9:31:35am

    Hmm.
    
    US: conservative govt
    Canada: conservative govt
    France: conservative govt
    Germany: conservative govt
    Japan: conservative govt (LDP majority)
    Italy: conservative govt
    UK: only leftist govt of the G7
    
    So, the world's problems are a left problem? The ALP is master of the world's economy and thus its problems are legitimately to be placed at its feet? Sorry to break this to you: Australia just is not that important.

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    • Mark:

      03 Dec 2008 9:46:27am

      Let's remember though that Canada, France and Italy have only (relatively) recently returned conservative governments. Also, conservative governments of Europe (like France and Germany) are really conservative in name only, they would be considered leftist here.

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      • chalkie:

        03 Dec 2008 10:12:26am

        Exactly - it is not the colour of the party, but the specifics of their actions.
        
        Nor is it fair to contrast mature industrial economies with our large resource-based one.
        
        SO, we need to go beyond labels and slogans and look to specifics. Just don't expect the oppositions of the workd to rise to this challenge nor look to careful, reasoned commentary from the misery-mongering media.

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  • Emma:

    03 Dec 2008 10:32:20am

    Ah - another person that hasn't heard of globalisation. Where do they come from - under rocks? Out from caves perhaps?
    
    I just love it when people vote for neo-liberal, de-regulating conservative governments, hand everything to the market and then don't understand that recessionary cycles are INEVITABLE in a market economy. And that with globalisation, global recessions (America sneezes, we all catch a cold) are also INEVITABLE. Regardless of who is in government.
    
    Australia experienced a massive recession and sky-high interest rates with Howard as treasurer. The current catastrophe in the US economy (which we are all being currently dragged under by) can be parked at the feet of the 8 year conservative Bush administration.
    
    

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• bitrich:

  03 Dec 2008 9:03:04am

  Sure high interest rates stomped on spending - but this only directly affects about one third of consumers who actually have house mortgages. A major factor must have been Rudd Labor who rubbished the Australian economy for over 2 years. And now, according to ABC reports yesterday, they have the gall to send out their backbenchers to reassure everyone that really our economy is strong.
  
  Spending half the surplus for a Xmas spend up probably convinced many that things were grim. And they rightly suspect that the Government will have to look for more funds down the track.

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  • kathy:

    03 Dec 2008 9:41:44am

    "the Government will have to look for more funds down the track"
    
    which I would say increasing tax... you work more you pay tax more and people dont work get more handout... pathetic really.

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    • chalkie:

      03 Dec 2008 10:03:33am

      I doubt the top 20% of wage earners could / would, even if they could, reduce their work efforts because their effective tax rates increased a couple of percent.
      
      If anything, it is the tax free threshhold and the rate at which welfare is pared back that affects employment decisions, and these people are unlikely to be targetted by Labor.
      
      And there are non-wage tax issues to contend with: CGT, company tax, kinds of deductions etc.
      
      I wonder how the Rudd tax review's terms of inquiry is being affected by recent events? It would be brave (in the SIr Humphrey sense) PM who forges ahead with major reform now.

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• Regs:

  03 Dec 2008 9:04:41am

  You can blame the global financial crisis as a diversion but the fact shows Rudd'st first budget did the damage.
  
  Labor wanted the economy to slow when they presented their budget in the earlier part of the year as they wanted to cut interest rates and lower inflation. So slow growth was already a Labor policy even before the financial crisis became much bigger.

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  • chalkie:

    03 Dec 2008 9:26:59am

    some selctive chronology and much tricky selective memory: remember inflation? In fact, the smart opinion was that Labor did the wrong thing by matching, and then honouring, the big tax cuts promised in the election campaign.
    
    Inflation was the main danger, and spending was its enemy and 'talking down' the economy was a soft method of getting us consumers to rein in our debt-fuelled spending.
    
    So, things changed, largely from external causes, and the govt changed its strategy to suit. By all means criticise the specific detail of the responses, even the mix and range of the measures, but not for the broad change in approach for that makes complete sense.

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  • Green:

    03 Dec 2008 10:27:30am

    Oh yes, blame Labor and ignore the effect of the GFC because, of course, Australia lives in a bubble, isolated from the economic conditions of the rest of the world....

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• cu:

  03 Dec 2008 9:05:35am

  The dramatic interest rate hikes combined with high fuel prices earlier this year has been catastrophic for this country.
  Fuel went up and up from March to June with no relief.
  The govt. were talking inflation and the RBA was increasing interest rates, crucifying consumers and fuel resellers.
  The delay in action by the current govt. can only been seen as incompetant.
  Question: How is that fuel prices are a measure for inflation?
  Question: Who is making the extra money? Its certaintly not the fuel sellers!
  
  

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  • peter69:

    03 Dec 2008 9:31:43am

    1. They are a measure for inflation due to the fact when they rise, an incredible amount of spending happens.
    
    2. Oil companies and governments (both ALP and LP are happy and have made little changes, best they could come up with was about 4 cents)

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    • cu:

      03 Dec 2008 9:55:31am

      peter69:
      It is is superficial inflation. Especially when the reseller is making less and less and the consumer is paying more and more, like 50cpl (per litre) in four months.
      We know the govt. is making more GST as the price goes up but if the resellers profit is cut they make less from them. Sales in general fell by approx. 30% and along with fuel sales shop sales also dropped.
      The GST and excise was 55cpl at the highest and is still around 48-50cpl.
      So if more and more fuel is being imported the extra money is going off shore.
      I would like to know what kick backs govt. get from importing fuel!
      Where were the ACCC while all this was going on?

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• Pen Pal:

  03 Dec 2008 9:22:41am

  I believe that the issue of to-day's figures will only be the start of further declines and all our economic indeces will dip further south over the months to come.
  
  This financial decline will, in my opinion, be longer lasting than the Great Depression and I hope our Government is up to the task and they limit the financial damage to the budget to a minimum.
  
  When unemployment starts to skyrocket, they will be punished for mismanagement.

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• dollas:

  03 Dec 2008 9:24:49am

  'Westpac chief economist Bill Evans says flagging consumer spending has been the biggest detractor from economic growth'
  
  Well, Bill, your bank is among the ones that caused the current problem; advertising superannuation schemes that were nothing but scams. Your 'BT Investment' recommendations cost me & my wife around $50 000 over the last three years and your investment advisers kept saying 'look to the long term investment potential'. We were conned until just before this stock crash when we took what was left of our money out and put it into an ordinary, honest, credit union account. Now, it might just last till one of us dies or till it runs down far enough for us to get a pension.
  
  So, sorry we aren't consuming. Right now, we are just surviving. Thanks to the mean spirit of the Labour Government, we don't even get the Xmas bonus that pensioners are being blackmailed with.

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  • chalkie:

    03 Dec 2008 10:08:23am

    Empathy with your losses to one side, how is it "mean spirited" for those not very poor to get money when pensioners, who by definition are poor get it?
    
    I say this as someone who is guilty of getting $1000 per child even though I earn what I consider a good income, and students and the unemployed, whose incomes are much lower than pensioners, get nothing. Now THAT is a sign of mean govt.

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• granny:

  03 Dec 2008 9:24:57am

  What is the Reserve Bank, what are central banks????? These select few who are NOT elected to this board, but chosen, have been manipulating our economy since its' inception in the sixties. Not only our economy, but the GLOBAL economy. We vote in elections for new governments, yet these people have more power over the governments and the population, they can lower and raise interest rates at will, but are beholding to no-one. Are they ever audited???? I am pretty sure that we have many economists who would be able to keep our economy flowing without the interference of the Reserve Bank, not this stop,start, stop, start movement that we have now. Before the Reserve Bank, in the sixties, our economy was more stable, inflation was not a problem then, nor should it be now.

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• P Q:

  03 Dec 2008 9:26:24am

  It is great to see Liberal supporters blaming the government for the current economic problems. They actually believe that the supposed success during the last government was caused by Howard and gang putting mineral resources in the ground and creating demand in China.
  
  Wonder why other countries have not snapped up miracle workers Howard and Costello who can create resources and demand at the wave of their hands to save them from the current woes.

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• Pen Pal:

  03 Dec 2008 9:28:47am

  Not only does this financial mess have a bearing on the economy, it will also adversely affect lives too.
  
  I know of a person in the financial markets who was given one of two choices - either take a redundancy or go offshore to Singapore. We've now lost him and his family as an Australian taxpayer - how many more people will be similarly affected?
  
  Mr Rudd has to stop the brain drain from Australia or matters will get a lot worse.

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  • P Q:

    03 Dec 2008 9:50:40am

    Having being based in Singapore for nearly two decades, I know that there is a large community of Australians there. It is not a loss to us if they maintain links here.
    
    We are unlikely to stop the flow of our citizens heading to Asia because that is where the opportunities are. It is time we woke up and realised that the past ties between Bush and Howard have brought us nothing but wars and isolation while Rudd's willingness to work with Asia will bring us benefits.

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    • Mark:

      03 Dec 2008 10:00:57am

      Willingness to work with Asia, as in proposing an Asian Union without consulting any other Asian country and just making himself look like an idiot.
      
      We all know anyway that he wasn't serious about that, it was designed to get a negative story off the front pages. Rudd's only strategy is a political strategy.

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    • Pen Pal:

      03 Dec 2008 10:19:29am

      I wasn't being critical of Asia P Q, I was being critical of the Rudd Government for getting us into a position where our people are only given a choice to lose their job here or go overseas and do well.
      
      It's a disgrace that any Government or any Government supporter is happy with that situation. You obviously volunteered to go to Asia, but most Australians like to live here.

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• David Lye:

  03 Dec 2008 9:37:44am

  This column is full of politics. Get off your rears and have a thought for those who will suffer. This will not be a short term financial experience.

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• DeepFritz:

  03 Dec 2008 9:53:14am

  What financial crisis?
  
  All I see is that I shall now have my home repayed about 4-5 years sooner than I was expecting than when I purchased owing to the fall in interest rates, goods have become cheaper and I like everybody else who doesn't play the share market is doing just fine...
  
  If it is the rich who are taking a hit and suffering - my heart just bleeds for them.

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• James:

  03 Dec 2008 9:54:09am

  Hey, that's not bad! In a quarter in which the global economy has practically been in free-fall decline, for the Australian economy to still be growing (if albeit slowly) is a fantastic result.
  I'm no fan of Mr Rudd et al (I voted for the other bloke) but credit where it is due, they seem have managed admirably in the past few months. If they can keep it up for another few months then we might get through this crisis relatively unscathed.
  

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• Skeptical:

  03 Dec 2008 9:58:47am

  Politics aside for this one.
  
  Yes there is a financial crisis - etc etc. Each country is different, but there are few things that have my antenna buzzing.
  1. There seems to be an abundance of herd mentality here by all governments of all countries. Irrespective of their own countries circumstances, they are all throwing a lot of cash around (wasn't easy $ the problem in the first place)
  2. Governments in Australia are nowing blaming all woes on the global economic crisis - and we all seem to be accepting this excuse at face value.
  3. A lot of companies are blaming things on global economic crisis. Yes problems exist - bome are getting free handouts too.
  4. The "person on the street" in Australia would have to be confused. I will have an economic crisis any day! - look - the government gives me cash, the interests rates are the lowest ever, fuel has gone through the floor, property prices down - and the advice from everyone is spend/spend/spend. (wasn't this the problem before?)
  
  Without Government spiel - can anyone see a slight danger in all this?

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• rkershaw:

  03 Dec 2008 10:01:03am

  In the current economic environment, measuring statistical minutia which belatedly reflects what we know about the steep decline in the economy, seems pointless.
  
  What is required is more earnest discussion about how to address the decline, and sustain the domestic economy in the face of fall in global demand.
  
  Is it really unreasonable to expect the Treasurer and Chief economists to lend their expertise to something other than reading the stats?
  

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• EC:

  03 Dec 2008 10:01:57am

  I love how everyone talks about it being 'Labor' or 'Liberal' this type or slowdown has nothing to do with our Government, no matter who is in we were bound to have a large slowdown.
  
  It is a principle of the Market, that there will eventually have to be a correction, and it happens the same all around the world at the same time, so really guys it has nothing to do with our Government here in Australia.

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• Di:

  03 Dec 2008 10:14:55am

  Get off your soap boxes guys!
  
  The financial crisis has nothing to do with either of our governments. So give it a break.
  
  The blame if you want to point a finger is right at USA, and the ripple effect has covered the globe.
  
  Don't kid yourselves, which ever government ( Lib or Labour) was in power in Australia at this time would have responded in the same way!

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