China Is Faltering: Rba Chief
The Age
Wednesday December 10, 2008
RESERVE Bank governor Glenn Stevens has warned that China's giant economy is faltering, and its industrial sectors are going backwards, putting forecasts of its continued growth in doubt.
His warning comes as leading Australian forecasters have predicted a recession, and a new survey shows business confidence has fallen below its lowest point of the last recession.Victorian confidence is now the lowest of any state in National Australia Bank's November business survey. Economic conditions in the state are now ranked worse than anywhere except NSW.In a speech that walked both sides of the street, Mr Stevens told the Australian Business Economists he felt "quiet confidence" about Australia's future, but many sectors faced tougher times than earlier expected.He warned that China's economy would not be the support some expected."Our own estimates suggest that China's industrial production probably declined over the four months to October," he said.While some of this reflects the Olympics and slowing export orders, he said, "more than that seems to have been occurring"."There is every chance that the rate of growth of China's GDP is currently noticeably below the 8per cent pace embodied in various forecasts for 2009."Mr Stevens' speech gave no forecasts for the Australian economy or whether Australia would enter a recession. But some of his audience now believe it will.The executive committee of the Australian Business Economists surveyed itself, and decided there is a 40 per cent chance that Australia will go into recession. Its 17 members prepare forecasts for, among others, the Macquarie Group, Citigroup, Deutsche Bank, Union Bank of Switzerland, Westpac, Commonwealth Bank, NAB and ANZ.They forecast that growth will slow to a mere 1 per cent next year. "A few committee members believed Australia could already be in recession," said the group's chairman, Rob Henderson."Even if the economy failed to pass the technical definition of recession, for many households and businesses, the economic downturn will very much feel like recession."The 17 forecast flat housing and business investment during 2009 and virtually no growth in jobs, with unemployment rising to 6.4per cent by 2010.The Opposition said yesterday unemployment could hit 1 million by 2010. Its workplace relations spokesman Michael Keenan told the Australian Industry Group that if the worst forecasts are right, "it is possible that up to 1 million people will lose their jobs in the near future".Unemployment peaked in December 1992 at 933,100 or 12per cent. It bottomed at 438,300, or 3.9 per cent, in February this year, but has grown almost 50,000 since.NAB chief economist Alan Oster is forecasting a recession in the non-farm economy, after its survey found sales and job losses at their worst levels since 1992, and forward orders at their lowest since 1991.He predicted that just a third of the Government's $8.7 billion handouts to pensioners and families would be spent. "Job shedding is under way across the non-farm sector," he said."We now see Australian GDP growth slowing to only 0.5 per cent in 2009."Mr Stevens was more ambivalent. The world faces a deeper downturn than in 2001, he said, and for Australia, "private demand could look weaker than it has for some years". But lower interest rates, fiscal stimulus and a 25 per cent currency plunge were "quite big changes ... (that) will be making a significant difference to conditions over the next year."
© 2008 The Age