Who to believe

[Lambethlad]

There has been a couple threads on PIO recently predicting the crash of the Oz economy.

Yesterday the OECD released a report that the Oz economy would outperform the rest of the world over the next year.

See below:

 

 

Australia's economy is predicted to outperform the rest of the developed world over the next year, that's according to the OECD.

 

The Organisation for Economic Cooperation and Development has also welcomed the Australian Government's commitment to a budget surplus.

 

However the OECD's latest report paints a gloomy picture for countries in the Eurozone.

 

Australia comes out of this looking very good. But, doesn't that fly in the face of what we're hearing about local economic pressures?

 

This is a very timely reality check and in fact the OECD says Australia's fundamentals continue to be strong and it's forecasting that the economy will grow more strongly over the next two years than almost every advanced economy in the world, that's with the exception of Mexico and South Korea. The OECD sees growth in Australia at 3.1 per cent in 2012 and 3.7 per cent next year.

 

It's also confirmed Australia's mixture of good fortune and good management in a very troubled world with low unemployment at 4.9 per cent, contained inflation, strong public finances, read: strong banks, and a very big pipeline of business investment from China and India.

 

The OECD has also mentioned it likes what Wayne Swan's doing.

 

Yes, the OECD has said that they, that they welcome the commitment to a budget surplus. As we know, in the lead-up to the budget, the surplus was encouraged by business, but some groups said, not a budget surplus at all costs. However, the OECD says restoring fiscal leeway while macroeconomic conditions are still favourable and the terms of trade are still high, is a very welcome development.

 

And, not surprisingly, the Treasurer, Wayne Swan, has jumped on this very optimistic report card and says the budget surplus and the OECD endorsement, does gives the Reserve Bank room to cut the interest rates again if it wishes. But, importantly, the OECD warns that some sectors of the Australian economy will continue to be hit by the high Australian dollar.

 

And this morning the dollar has fallen to just below 98 US cents which is good news.

 

A good outlook for Australia, the news isn't so rosey for Europe is it?

As we know, the situation continues to be dire, Tony, but the OECD thinks the eurozone situation could get worse and contract by as much as 2 per cent this year. And that's a real scenario given that the eurozone crisis has flared again in recent weeks given the possible exit of Greece.

 

The OECD's secretary-general, Angel Gurria, says the worst case scenario from financial contagion caused by a Greek unravelling would have very nasty implications for the rest of the world.

 

Now, this confidence crisis among economic and social actors is tilting the risks to the downside. A bad outcome scenario in the Euro area with implications for the rest of the world cannot be ruled out. So we need decisive policy action now.

 

Britain is not a eurozone member but there are fresh concerns that it's being dragged by the global jitters about Greece.

Britain is now anchored in a double-dip recession. Growth is flat-lining; unemployment is high, in particular, youth unemployment. And this is all about confidence and certainty and the potential fallout from a disorderly exit of Greece that could undermine bigger economies like Italy and Spain.

 

And this could all add up to force the Bank of England to step in to stimulate growth by cutting interest rates to below the current half a percent.

[Chardy]

If all this means we get more AU$ for our rubbish Pounds in a couple of months I will be well happy !

[amibovered]

And this morning the dollar has fallen to just below 98 US cents which is good news.

 

Until it starts pushing up inflation, petrol prices will go up, the price of imported goods (nearly everything) will go up, and so inevitably interest rates will go up with all that that brings with it.

[VERYSTORMY]

No one really knows what the next 12 months will bring, particularly if the euro unravels. In which the global economy everywhere will take a big hit. Including australia.