Australia’s Economy Affected By Natural Disasters

Despite first-quarter losses that resulted from the cycle of terrible natural disasters on the continent as well as with some of its primary trading partners, including Japan, many analysts and economists believe that the Australian economy may be entering a period of recovery.

Among the efforts made to manage the negative impacts of these issues, the government’s decision to freeze interest rates was expressly described by Reserve Bank governor Glenn Stevens as a temporary measure and warned that the rates would not remain frozen in the long-term. Stevens made it clear that the new direction would the proper option for the near-term, but emphasized it wasn’t a long-term solution.

The economy is stabilizing and becoming stronger. Evidence of this positive trend takes the form of declining unemployment rates, increasing business borrowing, and better business trading conditions.

Westpac’s monthly data pulse index has reached its highest level since immediately after the Australian economy came out of the global financial crisis and avoided recession. The index allows economists and other financial professionals to track how much the different segments of the economy, both public and private, has increased or decreased during the previous month. The latest data released in the reports shows that the overall performance is edging closer to the late 2007 levels when the economy was at the top.

Robert Rennie, the chief currency strategist for Westpac believes that the index suggest the economy is finally getting past the problems that plagued it due the Queensland floods and the troubles in Japan. There are certainly some reasons to get optimistic about the trends. He also noted the momentum of markets during December through the beginning of January was slowing some but still moving forward.

Such comments shine a light on the mixed results that are characterizing the overall pulse of growth in the world’s advanced economies. Developing countries are still recovering from a weak beginning.

Global factors such as the high price of gasoline in the United States are also influencing business confidence and the common sentiments amount Australian consumers. Meanwhile Europe is under pressure due to the increases in its currency and the affects of various austerity measures.

The information and data emerging from Japan is disappointing. According to its Performance of Manufacturing Index and other sources of information regarding business activity, the levels have dropped close to what they were at the height of the global economic crisis.

China, on the other hand, provides some contrast to the overall economic picture. It has assumed a serious leadership position among the emergent economies in the developing world. It is growing stronger even though it faced some weakening at the beginning of the year. The Chinese made attempts to impose new restrictions on the domestic monetary policy.

In the last six weeks, China’s growth has been particularly strong. However, there are questions, some posed by Robert Rennie, about whether the Chinese economy would maintain its upward momentum. The country’s levels of manufacturing activity as reported in the newly release index figures prompted the questions.

Further information contained in the Westpac financial stress index when combined with IMP methodology lets the company track movements in the equity, volatility in the markets, as well as the bond and Forex markets. The latest data indicates that the levels of financial stress in the US and Europe are declining.

The markets have grown more comfortable with managing the riskier economies throughout Europe without problems spreading through the region or even on a global level.

The same data shows that in Australia the strong local dollar has actually depressed the equity markets.

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