# How has Australia avoided recession?



## knocker (29 July 2009)

Any ideas? Maybe we can be a model to the rest of the world?


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## noirua (29 July 2009)

knocker said:


> Any ideas? Maybe we can be a model to the rest of the world?



In a word "China".


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## queenslander55 (29 July 2009)

noirua said:


> In a word "China".




Two words China and So Far...

...sorry that was three words.


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## prawn_86 (29 July 2009)

Luck?


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## wayneL (29 July 2009)

Stockpiling



> More disturbing, *China has upped its ore purchases in recent weeks even as mainland growth seems to be slowing, suggesting an effort to lay in a stockpile for a longer showdown against Rio-BHP*.
> 
> If the Rio arrests mark the beginning of a Chinese war to remake the global ore market more to China's liking, Beijing might want to think again. Its clumsy attempt to make computer makers instruments of Internet censorship was not exactly confidence-inspiring. Ensuring nobody wants to do a business deal with China for fear of being charged with a death penalty crime hardly improves the case. Then there's the epic civil disorder in Xinjiang.
> 
> The final casualty may be China's overblown reputation for macroeconomic competence, on which so many hopes for global recovery depend. *There are already signs its stimulus efforts are running off the rails. *The world might appreciate a signal right now that China's government actually knows what it's doing. http://online.wsj.com/article/SB124761913912742517.html




But that may end soon.


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## wayneL (29 July 2009)

http://www.sunnewsonline.com/webpages/features/energy/2009/july/27/energy-27-07-2009-002.htm


> Second, extremely loose monetary policies (zero interest rates, quantitative easing, new credit facilities, emissions of government bonds, and purchases of illiquid and risky private assets), together with the huge sums spent to stabilize the financial system, may be causing a new liquidity-driven asset bubble in financial and commodity markets. For example, Chinese state-owned enterprises that gained access to huge amounts of easy money *and credit are buying equities and stockpiling commodities well beyond their productive needs.*


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## Bushman (29 July 2009)

knocker said:


> Any ideas? Maybe we can be a model to the rest of the world?




We started the recession with: 
1. budget surplus (thanks commodities boom); 
2. low unemployment; 
3. high interest rates; 
4. Four well capitalised banks who, due to the benefits of an oligopoly, did not need to chase securitisation; 
5. weighting to commodities companies (i.e. China and India effect); 
6. no significant over-supply of property 
etc... 

Is that luck or planning?


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## Temjin (29 July 2009)

What do we have left?

- One of the world's highest private debt to GDP ratio. (don't tell me this is irrelevant) See chart below from Steve Keen's latest blog post. It's much higher than the previous two depression and now almost everybody is expecting this ratio to go even higher indefinitely. 



- Slashed interest rate to lowest since 1960s and that is when low interest rate was EXACTLY the source that CAUSED the unsustainable boom in the first place. 
- A public debt deficit and expected forecast, while considerably lower than most other OCED countries, would from a historic perspective, takes decades to pay off. (don't tell me bringing forward demand is good) 
- Massive BAD DEBT (both residental, personal loan and ESPECIALLY commercial property loans) on Australian banks' balance sheets that HAVE NOT BEEN marked down to market value yet and are delaying the inevitable through capitalising interest rate arrangements and using accounting tricks to "prevent" regular revaluation. If they were revalued right now, god help us. 

We are simply delaying the evitable by using stimulus packages to "manipulate" the GDP statistic to the positive side. Of course throwing money in would increase this statistic due to its inherent way of calculating "economic health", but is this truly sustainable?

What about China and our supposedly "get out of jail" free card from them? Can anyone reasonably expect them to COMPLETELY take over the lost in export demand from the US through domestic consumption? Research indicates that China is currently replacing only 23% of their export. 

It's impossible in the near term for them to replace US/UK's demands completely, especially when they are facing a SECULAR change in consumer behaviours. (i.e. they will NEVER go back to the pre-bust consumption debt fuelled by ultra cheap debt) Anyone who thinks China will save us are living in denial land. 

So back on topic, yes, we have avoided an OFFICIAL recession based on OFFICIAL GDP statistic. But is GDP a true indicator of economic health, especially when stimulus packages are manipulating the data to make it seem so?


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## MR. (29 July 2009)

wayneL said:


> Stockpiling
> 
> But that may end soon.




Especially the bulky commodities. 

How's this for a grande plan. Stop buying and pick up a few shares on the cheap! 



Bushman said:


> We started the recession with:
> 1. budget surplus (thanks commodities boom);
> 2. low unemployment;
> 3. high interest rates;
> ...




Both.

On the planning side still think the levels of debt could have been better managed with higher interest rates years ago. It would have put us in a better position than now. IMO


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## MR. (29 July 2009)

Temjin said:


> What do we have left?
> 
> - One of the world's highest private debt to GDP ratio.




hear hear


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## The Once-ler (29 July 2009)

We are just lucky. Always have been and it's our moniker. We are the 'lucky country' after all and always will be.


The only thing we produce that the world needs, is food, rocks, dirt and energy, and we can produce that stuff cheaper than our competitors due to so much unoccupied land.

While ever the commodities boom continues and as long as we don't fill this place up with people like everywhere else, we will be fine.


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## dhukka (29 July 2009)

The "we're different in Australia" crowd are not going to like this but.... let’s be clear, there is nothing official or technical about the 2 consecutive quarters of negative GDP approach to measuring recessions. Using GDP as the sole measure is at best crude. That’s why the NBER in the US have come up with a much more robust way of measuring recessions and why it is up to them to decide when official recessions start and begin in the US.

In a research discussion paper published by the RBA in 2005, Gillitzer, Kearns and Richards actually used a coincident indicator approach similar to that of the NBER that proved to be much more reliable than the inherent volatile readings of GDP. 

Furthermore, if you look back at previous recessions in Australia. There was actually only 1 quarter of negative growth in the 1974-75 recession. In 1982-83 there were 3 consecutive negative quarters although the recession got underway in the first quarter of 1982 even though the second quarter grew 0.7%. In the early 90’s recession there were 4 consecutive negative quarters of GDP. 

More here.


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## Glen48 (29 July 2009)

Checked my bank account last night and have another 4 grand from the Feds. Didn't know there was a another vote bribe going on.. no wonder KRUDD is so high in the polls. But how much longer can we afford this?
the ATO is subsiding every ones wages.


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## Beej (29 July 2009)

dhukka said:


> The "we're different in Australia" crowd are not going to like this but.... let’s be clear, there is nothing official or technical about the 2 consecutive quarters of negative GDP approach to measuring recessions. Using GDP as the sole measure is at best crude. That’s why the NBER in the US have come up with a much more robust way of measuring recessions and why it is up to them to decide when official recessions start and begin in the US.
> 
> In a research discussion paper published by the RBA in 2005, Gillitzer, Kearns and Richards actually used a coincident indicator approach similar to that of the NBER that proved to be much more reliable than the inherent volatile readings of GDP.
> 
> ...




So as to avoid a semantic debate around the definition of "recession", how about we ask *"How has Australia avoided a SEVERE economic contraction as being experienced in other western economies like the US and UK?"*

There's no denying Australia is in a recession-of-sorts/period of economic contraction, or best case virtually no growth - unemployment is rising as a result, but so far it seems to be nowhere near as bad as in those other countries by any measure.

Cheers,

Beej


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## Trembling Hand (29 July 2009)

The Once-ler said:


> We are just lucky. Always have been and it's our moniker. We are the 'lucky country' after all and always will be.




Oh dear!!



> Origin
> The title of Horne's The Lucky Country comes from the opening words of the book's last chapter:
> 
> Australia is a lucky country, run by second-rate people who share its luck.
> ...




http://en.wikipedia.org/wiki/Lucky_Country


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## Julia (29 July 2009)

Glen48 said:


> Checked my bank account last night and have another 4 grand from the Feds. Didn't know there was a another vote bribe going on.. no wonder KRUDD is so high in the polls. But how much longer can we afford this?
> the ATO is subsiding every ones wages.



Good Lord, what's the 4 grand for?   I don't know of any stimulus payment at present.  Is it a tax refund or something that just relates to you?


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## Julia (29 July 2009)

The Once-ler said:


> We are just lucky. Always have been and it's our moniker. We are the 'lucky country' after all and always will be.



Oh.  I see.  Well, that's really good then.
No worries.  Not ever.


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## Buckeroo (29 July 2009)

Beej said:


> So as to avoid a semantic debate around the definition of "recession", how about we ask *"How has Australia avoided a SEVERE economic contraction as being experienced in other western economies like the US and UK?"*
> 
> There's no denying Australia is in a recession-of-sorts/period of economic contraction, or best case virtually no growth - unemployment is rising as a result, but so far it seems to be nowhere near as bad as in those other countries by any measure.
> 
> ...




Yep, definitely more of a severe economic contraction....and we can thank the Libs for the better than expected start to the down turn - and there was nothing lucky about it, just good management. 

And any talk of avoidance is premature - there's a long & painful downturn still to come.

Cheers


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## wayneL (29 July 2009)

Buckeroo said:


> Yep, definitely more of a severe economic contraction....and we can thank the Libs for the better than expected start to the down turn - and there was nothing lucky about it, just good management.
> 
> And any talk of avoidance is premature - there's a long & painful downturn still to come.
> 
> Cheers




Agree on both points.

Compare the US and UK who are both starting from behind the eight ball fiscally, despite boom economies previously. 

F~~~ing stupid really.

It's a shame this lot are going to throw it all away.


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## Trembling Hand (29 July 2009)

Buckeroo said:


> and we can thank the Libs for the better than expected start to the down turn - and there was nothing lucky about it, just good management.




Really which bit? The middle class welfare? 

or was the liberal party responsible for all the Iron Ore in the ground?


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## wayneL (29 July 2009)

Trembling Hand said:


> Really which bit? The middle class welfare?




Good point. They certainly splashed some bribery around themselves in the last term or two.

Baby bonus??? FFS!


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## Buckeroo (29 July 2009)

Trembling Hand said:


> Really which bit? The middle class welfare?
> 
> or was the liberal party responsible for all the Iron Ore in the ground?




The simple difference Trembling Hand between Labor & Liberals, is one puts us into debt & the other takes us out of debt. 

It very plain to see who's policy will improve living standards for all us.

Cheers


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## kincella (29 July 2009)

I dont believe we have avoided anything....there is a long slow road to travel before we get out of this mess...
just because there is some exuberance out there at the moment, means nothing
and Stevens talk of raising interest rates by the end of this year, will mean any jobs that were at risk, will be very risky now and  probably lost....
stupidity to think its over, and to raise interest rates while unemployment is rising....
are you all forgetting about that huge debt of 300 billion hanging over our heads....Glen Stevens is grossly incompetent, as he proved last year while raising interest rates...now he is at it again...
some people really need to sober up....its not party time..thats a long way off into the future...


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## Buckeroo (29 July 2009)

wayneL said:


> Good point. They certainly splashed some bribery around themselves in the last term or two.
> 
> Baby bonus??? FFS!




True WayneL, but they could afford to - and why not splash a little around if you have it. Its like if you work hard for extra dollars, why can't you buy something a little special.

Labor on the other hand splashes out without the responsibility of paying it back. They never have & never will pay anything back.

Cheers


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## Trembling Hand (29 July 2009)

Buckeroo said:


> The simple difference Trembling Hand between Labor & Liberals, is one puts us into debt & the other takes us out of debt.
> 
> It very plain to see who's policy will improve living standards for all us.
> 
> Cheers




I do not intend to get into an argument about Labor & Liberals.
My point was that the libs had a BIG surplus that came from a commodities boom(luck) which they distributed to the middle class to build on the boom.

Very Very inefficient use of wealth thats now been p!ssed up against the wall. That's not good management.


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## Beej (29 July 2009)

Buckeroo said:


> The simple difference Trembling Hand between Labor & Liberals, is one puts us into debt & the other takes us out of debt.
> 
> It very plain to see who's policy will improve living standards for all us.
> 
> Cheers




That's nothing but a false platitude, ie political propaganda. Hate to see this thread turn into a political/partisan slanging match, but it seems to be heading that way.

For the record, the FACTS are that the Hawke Labor government in the 80s reduced the commonwealth gross debt by a significant amount, after it had been ran up massively by the previous LIBERAL government, with guess who as Treasurer and thus at the economic helm? The Liberal hero Mr John Winston Howard that's who! Of course he had a severe recession to deal with, so nor real surprise that debt ran up if you take the partisanship out of it.

In Howards case later on as Prime Minister, he paid off debt built up during the 90s recession with asset sales and boom time tax revenues, and he was lucky as at the same time government spending in real terms increased, so there was no razor gang or big time frugality going on then, as others have pointed out re all the middle class welfare, tax cuts etc that's for sure! 

The reality is that in Australia government debt runs up or down based on the economic/business cycle regardless of the political flavour of the government of the day. If we just accept this then a meaningful discussion on the current Australia economic situation can ensue....

Cheers,

Beej


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## Trembling Hand (29 July 2009)

Buckeroo said:


> True WayneL, but they could afford to - and why not splash a little around if you have it. Its like if you work hard for extra dollars, why can't you buy something a little special.




OMG!!!

"They" didn't have anything!!!!! They didn't work, they taxed.


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## Buckeroo (29 July 2009)

Trembling Hand said:


> I do not intend to get into an argument about Labor & Liberals.
> My point was that the libs had a BIG surplus that came from a commodities boom(luck) which they distributed to the middle class to build on the boom.
> 
> Very Very inefficient use of wealth thats now been p!ssed up against the wall. That's not good management.




Yep, a surplus did occur during the resource boom, but in reality the debt was well down the track of being paid off by then. The resource boom happened after 2000. 

Before the resource boom, the country was fairing very well and weathered the Asian crises easily.

And by the way, the Libs did also save a lot of the surplus and which Labor has now got there hands on.

Cheers


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## nunthewiser (29 July 2009)

Beej said:


> That's nothing but a false platitude, ie political propaganda. Hate to see this thread turn into a political/partisan slanging match, but it seems to be heading that way.
> 
> For the record, the FACTS are that the Hawke Labor government in the 80s reduced the commonwealth gross debt by a significant amount, after it had been ran up massively by the previous LIBERAL government, with guess who as Treasurer and thus at the economic helm? The Liberal hero Mr John Winston Howard that's who! Of course he had a severe recession to deal with, so nor real surprise that debt ran up if you take the partisanship out of it.
> 
> ...




cheers beej . good post


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## wayneL (29 July 2009)

Beej said:


> For the record, the FACTS are that the Hawke Labor government in the 80s reduced the commonwealth gross debt by a significant amount, after it had been ran up massively by the previous LIBERAL government,




Yes, a period of political cross-dressing as I remember. The Fraser mob doing their best social democrat (Labor) imitation, and Hawke/Keating being the social liberals (wet Liberal).

At least Howard and Rudd have brought us back to the stereotypes.


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## dhukka (29 July 2009)

kincella said:


> I dont believe we have avoided anything....there is a long slow road to travel before we get out of this mess...
> just because there is some exuberance out there at the moment, means nothing
> and Stevens talk of raising interest rates by the end of this year, will mean any jobs that were at risk, will be very risky now and  probably lost....
> stupidity to think its over, and to raise interest rates while unemployment is rising....
> ...




Agree 100%, especially with the point in bold, the RBA with Stephens at the helm had it completely wrong 18 months ago, why should we think they have a clue what they're doing now?


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## moXJO (29 July 2009)

Beej said:


> The reality is that in Australia government debt runs up or down based on the economic/business cycle regardless of the political flavour of the government of the day. If we just accept this then a meaningful discussion on the current Australia economic situation can ensue....
> 
> Cheers,
> 
> Beej




Actually policies that add costs and red tape to business are a surefire way of slowing things down. And let’s face it lab's are notorious for it.


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## Buckeroo (29 July 2009)

Beej said:


> The reality is that in Australia government debt runs up or down based on the economic/business cycle regardless of the political flavour of the government of the day. If we just accept this then a meaningful discussion on the current Australia economic situation can ensue....
> 
> Cheers,
> 
> Beej




Fair point, but will have to agree to disagree so that the discussion can continue.

Cheers


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## trainspotter (29 July 2009)

Come in spinners ... wait until the interest bill on the debt that Mr Rudd has rung up to hit. Then we will know what real pain is. Recession ... what recession? Economic downturn is more appropriate. No more or less than 1987 or 1991 come to think of it. Australia was 98 billion in debt then when Libs came in and PAID off the "Credit Card" that Keating had left for us to deal with. YES they did have a very good run of WORLD economy stimulus but if I recall they also set up the "future fund" amongst other things. Enough ranting by me about Labs vs Libs policies.

Close economic ties with China and the amount of natural resources that we send overseas has been our main factor to deflect the blows of downturn. Regulated bank practices with independent valuations has assisted in avoiding housing to crash too dramatically. I seriously doubt the $900 x 3 from Mr Rudd has done SFA other than added 42 billion to the national debt.  (Oooops there I go again) FLAME ON JOHHNY STORM


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## Timmy (29 July 2009)

trainspotter said:


> I seriously doubt the $900 x 3 from Mr Rudd has done SFA other than added 42 billion to the national debt.




Mr. Spotter - I know you are wealthy beyond the wildest dreams of avarice, but let me assure you, out here in Realworld Australia where we have cut back from 7 lobsters a week to 5, $42 billion is a significant sum and has boosted poker-machine earnings notably, if nothing else.


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## trainspotter (29 July 2009)

I just about droppped the Moet and spilled the caviar down the front of my best blazer on the last post Timmy.


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## Timmy (29 July 2009)

trainspotter said:


> I just about droppped the Moet and spilled the caviar down the front of my best blazer on the last post Timmy.




LOL!

(And thanks for the 2nd pic!)


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## Sean K (29 July 2009)

Timmy said:


> LOL!
> 
> (And thanks for the 2nd pic!)



Nice barque too.


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## Buckeroo (29 July 2009)

trainspotter said:


> I just about droppped the Moet and spilled the caviar down the front of my best blazer on the last post Timmy.




Is that a 2 for 1 deal? - and I don't mean the shampas!

Cheers


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## trainspotter (29 July 2009)

I think I will float around the Republic of Banana Land until the champagne runs out and the girls learn to speak english. This could take awhile as they only respond to hand signals at the moment. 

Doesn't a barque have sails? No motor ... NO GO is the rule.


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## Julia (29 July 2009)

Buckeroo said:


> True WayneL, but they could afford to - and why not splash a little around if you have it. Its like if you work hard for extra dollars, why can't you buy something a little special.
> 
> Labor on the other hand splashes out without the responsibility of paying it back. They never have & never will pay anything back.
> 
> Cheers



I'm not at all sure it won't at least partially be paid back.   Mr Rudd has demonstrated considerable political savvy, and will imo be very aware of just such a cliche being applied to him.

That's why he's all over the media at present warning of the even harder times to come, as budgets are slashed to reduce the deficit.

I'm not sure whether his current popularity will continue once the punters find themselves faced with increased taxes and charges instead of cheques  to spend.

The irony would be funny if it were not so serious:  billions wasted on stuff many didn't need so that the government can boast about how they saved us from recession, followed by probably cuts to essential services to pay back the wasted funds.


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## trainspotter (29 July 2009)

Rudd will combine his bleak new message with insistence that the government's fiscal stimulus - such as the $14bn primary school construction program - will continue to support jobs. 

*But he is warning working families to prepare for higher petrol prices and supermarket bills, on top of higher interest rates, when the economic recovery arrives and global commodity prices turn up. *

That's a bit rich. In opposition, Rudd promised to ease the household squeeze from higher petrol and food prices during a global commodity boom.

But the actual policy response - including Fuel Watch and Grocery Watch - turned out to be a useless political stunt. He watched them alright ... come and go with NIL result. Cost to us ... millions.

The Lord giveth and Rudd taketh away. Startling info here. He is the one running up the debt on the "Credit Card" and WE have to pay it off. "Here have a "stimulus package" (3 x $900) Ohhhh by the way ... I'm gonna increase taxes and don't say I didn't warn you!" Mr Rudd said


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## Buckeroo (29 July 2009)

Julia said:


> I'm not at all sure it won't at least partially be paid back.   Mr Rudd has demonstrated considerable political savvy, and will imo be very aware of just such a cliche being applied to him.
> 
> That's why he's all over the media at present warning of the even harder times to come, as budgets are slashed to reduce the deficit.
> 
> ...




I may have been a bit harsh Julia, but giving the benefit of the doubt, will he have the courage to increase taxes to pay for all his spending. I haven't seen any likelihood of this yet except, when there's a carrot for the public e.g. dental care, $3 billion of it!

I will have respect for him when he comes out & says, its now time to buckle down & start paying back the stimulus - none of this mamby pamby spin I keep hearing - I suppose thats what makes me .

Cheers


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## trainspotter (29 July 2009)

*China to help Australia avoid recession: Treasurer Wayne Swan*

14th July 2009, 10:45 WST 

China, expected to be the world’s fastest growing economy in 2009, is a key factor in helping Australia avoid a technical recession, Federal Treasurer Wayne Swan says. (WOW .. really ??? )

Despite current diplomatic strains between the two countries over the detention of Rio Tinto executive Stern Hu by Chinese authorities, Mr Swan was upbeat about the outlook for Australia’s key trading partnership. (He beats off alright)

“As our second-largest trading partner in 2008, China is of particular importance to the Australian economy,” Mr Swan said at a conference on China at the Australian National University in Canberra. Both countries were doing better than most in difficult economic times, he said.(Stating the bleeding obvious here)

“Both China and Australia have bright economic futures, which will reinforce each other as our trade and economic relationship develops,” he said.
(More repetitive garbage)“Through developing our relationship with China, Australia will be better placed to meet the rising demands of the Chinese economy as China assumes an increasingly greater role in the global community.” (This guy is a genius isn't he!)

While Chinese economic growth had slowed, it was still expected to be the fastest growing major economy this year. (Is this a statement or a fact?)

This helped Australia avoid a technical recession in the March quarter, when other economies were going backwards, Mr Swan said. (OMFG ... give this guy a medal)

In the six months to the March quarter, Australian export volumes increased by 1.8 per cent, while exports from the UK, France, Canada and the US fell more than 10 per cent. (True)


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## kincella (29 July 2009)

KISS....thats what these simpletons are doing....they have no idea what to do....sounds like what they were saying a year ago....before the GFC...they had no idea then...and nothing has changed....
of course the really stupid people will listen, and then believe them...


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## Gamblor (29 July 2009)

I think it's still early and we can't claim to have avoided the R word yet but things could be much worse.


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## trainspotter (30 July 2009)

Gorgon Gas Project on Barrow Island given Green Light. 50 billion plan announced today. Touted as a "recession buster" project that will cushion the economy against the world financial downturn. Employ 10,000 people during construction phase blah blah 15 million tonnes of LNG yadda yadda yadda start delivering in 2014. Lift Australia's GDP by 64.3 billion and add 4 percent to state gross product over the life of the project. Nahhhhhh let's not use LNG .... burn coal instead. Good night Nurse !


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