Australia expected to recover slowly

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According to reports by a Canberra based consultancy named Access Economics, the Australian economy is likely to recover comparatively slower as world-growth increases next year. Access attributes this subdued recovery to higher interest rates and circumspect consumers.

Access predicts that GDP would increase this year by 1.9 percent and by 3.2 percent in 2010-11. Due to this, Australia is likely to come out from the recession growing only at 3%, which has been the trend for a long time.

Access goes on to forecast that the Reserve Bank is likely to increase official interest rates by a further 2 percentage points in another two years. It says that even though the Australian economy managed to fare better during the recession, but it came at the cost of a slower recovery.

In addition to higher rates of interest and circumspect customers, the withdrawal of stimulus measures by the Federal Government and deceleration of the Chinese growth also contributed to the fact that the recovery would be weaker than the recoveries after the recessions seen in Australia in the 1980s and 1990s.

The unemployment rate is expected to peak to 6.8 percent in mid-2010 from the now standing figure of 5.7 percent. The recovery could be a jobless recovery as the employers are more likely to recruit new employees only after increasing the working hours of the employees they already had, which would keep the employment growth rate as low as 0.3 percent this year and 2 percent next year.

According to Access, the main reasons for the economy to have done better than experts’ expectations in 2009 were that the consumers had not stopped spending, employers had reduced hours instead of cutting jobs, and the Chinese had kept on importing products from Australia.