Economist: Australian economy to hit recession

Japan's gross domestic product (GDP) contracted by an annualized 12.7 percent in the October-December quarter of 2008, the fastest pace in about 35 years as the global financial crisis took a heavy toll on the world's second largest economy, said a government report on Monday. Overseas markets have cut back on purchases of Japanese automobiles and electronics and Japanese consumers have cut back on spending as companies cut production and lay off large numbers of workers. AMP Capital's chief economist Shane Oliver says Japan is Australia's largest export market so it will be a terrible six months for the resources sector and local agricultural producers. "That in turn, I think, will make it very difficult for Australia to avoid a recession," he said. "My view is that we will have a recession ... the stimulus package will help mute that recession but I don't think it will be enough to stop a recession, given the slump in exports that we're likely to see down the track." Oliver says while Australia largely avoided the Asian financial crisis, it is unlikely to be spared from the worst of the current global downturn, Kazinform quotes Xinhuanet. "One must bear in mind that even though Japan is still our biggest export market, right through the 1990s the Japanese economy was in and out of recession and yet Australia managed to grow quite nicely through that period," he said. "The flip-side though is that back in the 1990s, the rest of the world was in far better shape than it is now, so there's no doubting the fact that the downturn in Japan certainly is of concern for Australia."