Melbourne Institute News March 2009 ISSN 1442-9500 (print)
ISSN 1442-9519 (online)
Print Post Approved PP381667/01204
Issue 23
Let’s Not Panic: Director’s Opinion
PricewaterhouseCoopers Melbourne Institute Asialink Index 2008
PricewaterhouseCoopers Melbourne Institute Asialink Index 2008 Australia’s first comprehensive index of AustralianAsian engagement, the PricewaterhouseCoopers Melbourne Institute Asialink Index, was launched in February. Page 3
Profile of the Melbourne Institute’s Health Economics Research Program This article outlines the current activities and plans of the Melbourne Institute’s Health Economics Research Program. Page 4
Review of the Australian Economy 2008–09: Recessions, Retrenchments and Risks
This is a summary of an article appearing in the March Australian Economic Review. It reviews the Australian economy as it grapples with the implications of the global financial crisis and the decline in commodity prices and world growth. Page 6
Policy makers and forecasters have been unpleasantly and powerfully surprised several times as the global financial crisis has unfolded. But downturns don’t last forever and history suggests that policy makers can also be surprised on the upside. For example, shifts in consumer, business or financial market sentiment can be difficult to predict but work powerfully to accentuate both the economic slide and the recovery. In dealing with the still-evolving crisis we would be wise not to lock ourselves into policy positions that cannot be quickly reversed, if necessary, or which are inconsistent with longer term needs. This is true even though growth has turned negative. There is no doubt that the United States, Japan and much of Europe are facing recession or worse. In some cases there is a real risk of deflation, an insidious condition that is difficult to counteract. World demand and the growth of world trade are faltering and access to credit has become constrained. Australia is heavily (and usually beneficially) reliant on world markets to buy and sell goods and services and for access to capital. Consequently Australia’s growth rate has slowed. But the household debt problems are not as deep-seated in Australia, and our financial system is fundamentally much stronger than that of many countries. Provided the world’s markets for goods, services and credit remain open for business (that is, that policy abroad succeeds in stopping the rot), Australia will most likely recover earlier and possibly faster than those countries whose circumstances define the nature of the crisis. Australian authorities have rightly attempted to restore credit flows, sustain domestic demand and moderate the rise in unemployment. Although the next few quarters will no doubt look and feel nasty, economic growth will recover in Australia, and when it does, the policy challenges that existed prior to the crisis will remain. Our Continued on page 2
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