Australia's economy shows resilience, but storm clouds lie ahead

This article from The Australian talks about how firms there invested strongly in the fourth quarter despite the global crisis, but Australia's treasurer says that Treasury forecasts released earlier this month show that business investment will slow in the coming months.

Private new capital spending on buildings and equipment in Australia rose 6 percent to $24.89 billion in the fourth quarter of 2008 from $23.49 billion in the third quarter, according to the Australian Bureau of Statistics. Economists on average expected that spending in the fourth quarter 2008 would fall 3.3 percent on a quarterly basis, and rise 5 percent for the year.

The strength in investment increases the chance that Australia's economy continued to grow in the closing quarter of 2008. Forward estimates of investment were scaled back, but not by the 10 percent to 20 percent range expected by some economists.

The article states that the data highlights the relative strength of the Australian economy amid the global crisis, raising expectations that its own downturn will be shallow by comparison to major economies.

Economists said forecasts for economic growth in the fourth quarter are likely to be nudged higher. They also say the latest data should encourage expectations that the Reserve Bank will keep interest rates steady at a policy meeting next week.

According to a senior economist at RBC Capital Markets, the data shows surprising strength, but it is likely to be the 'last wave' of spending. She said the numbers are probably a residual effect of the investment boom that fueled the economy in recent years, but that the outlook will still be 'soft.'

Ed