Talk of recession premature, Ruthven

The Chairman of global strategic business information provider IBISWorld, Phil Ruthven, has indicated a positive future for the Australian economy, saying that the nation is well placed to avoid a recession.

The Chairman of global strategic business information provider IBISWorld, Phil Ruthven, has indicated a positive future for the Australian economy, saying that the nation is well placed to avoid a recession.

In a special presentation to media and analysts last Friday, held at the Sofitel Wentworth, Sydney, Ruthven announced that talk of a recession, let alone a depression, is premature, if not almost ridiculous in the case of a depression.

According to Ruthven, Australia has three weaknesses in 2008: a chronic lack of savings that led yet again to massive off-shore borrowings in F2007 (over $52 billion), overpriced housing (by around 30+ %), and some over-leveraged property trusts.

“These weaknesses, however, are not enough to panic about,” he said.

“What may not be known by most Australians is that consumption expenditure—mainly by households but supported by government spending on education, health and other consumer services—has never been negative in five decades.

“It isn’t consumers that cause recessions; rather it is nervous boards of directors in the business world who savagely cut their capital expenditure plans. They are also not helped by difficulties in getting the money from spooked or under-capitalised banks, scared stockmarkets and other fearful lenders.” However, the avoidance of a recession for Australia in 2009-10 should not be that difficult, according to Ruthven. “The Treasury in Canberra and our Reserve Bank are both skilled to act swiftly, and yet again avoid a recession,” he said.

“The Rudd Government has now acted quickly to bolster both capital and consumption expenditure in the middle of October this year so, another potential recession would not be due until 2018 at the earliest. Here’s hoping, but we can do so somewhat confidently.”

Ruthven said Australians have the serendipity of a mining prices boom, as well as triple A rated financial institutions to bank on.

“We may not be economically and financially bullet-proof here in Australia, but we are possibly the best placed in the OECD,” he said.

According to Ruthven, the impending carbon trading scheme represents a risk for mining companies in this downturn in economic growth, and the rest world needs to be on board to cut emissions.

“Australia represents a relatively small percentage of carbon output,” Ruthven said.

“Major carbon emitters need a solution that will not place their industries in uncompetitive position globally.”

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