Great Recession in Oceania
| Late 2000s recession |
The Australasian business community has been hit hard by the global financial crisis for a number of reasons. Although regional banks generally have good liquidity requirements, the commercial wing of the industry was overexposed to sovereign wealth funds and governments made few provisions for the drop off in trade with China. Additionally, many institutions of the New Zealand economy are regulated by Australian authorities, as cross-border banking has been allowed to gather pace since the late 1980s.
Australia
There has been a credit market crisis in the Australian economy since early 2008.[1] The taxation system is currently being reviewed in order to reduce its complexity and increase the tax concessions made for investment income, although it remains uncertain what — if any — financial products will be excluded in the proposed changes.
In July, the National Australia Bank cut a A$850 million bond sale by two thirds following investor flight and opted for a 100 percent write-off on a clutch of "senior strips" of AAA-rated collateralized debt obligations (CDO) worth A$900 million.[2][3][4] Banks began avoiding lending for land, to focus on refinancing existing clients, and small developers held on to their properties as second-tier loan costs (up to $15 million) were, reportedly, unaffordable since February.[5] Housing prices consequently fell in the second quarter for the first time in about three years, restricting consumer confidence to its lowest level in 16-years.[6] High profile casualties of the credit crunch include Allco Finance, MFS, ABC Learning, Babcock & Brown and Centro while numerous other institutions have lost a significant part of their value.[7]
Sources such as the IMF and the Reserve Bank of Australia predict Australia is well positioned to weather the crisis with minimal disruption, sustaining more than 2% GDP growth in 2009 (while many Western nations go into recession). The World Economic Forum recently ranked Australia's banking system the fourth best in the world, while the Australian dollar's 30% drop is seen as a boom for trade, shielding from the crisis, and for helping to slow growth and consumption.[8][9]
Some analysts have predicted the continuing decline of trade in 2009 could put the economy into recession for the first time in 17 years.[10] Unemployment will increase because of slower growth, declining profits and government revenues.[11]
In March 2009, Canberra announced that the Australian economy contracted by 0.5% in the last quarter of 2008, leading to fresh worries of recession.[12] On Wednesday the 22nd of April, 2009 it was declared officially that Australia was in recession by Prime Minister Kevin Rudd. According to the Sydney Morning herald article on the 3rd of June 2009 the Australian Economy is not in technical recession (two consecutive quarters) for the full article here it is http://business.smh.com.au/business/australia-dodges-recession-20090603-buyq.html
New Zealand
New Zealand Institute of Economic Research's quarterly survey showing New Zealand's economy contracted 0.3 percent in the first quarter and Treasury figures suggested the economy also contracted in the June quarter putting New Zealand in a technical recession.[13] The Treasury says the economy could recover in the second half of the year under the impact of high dairy prices boosting farmer incomes and cuts to personal tax rates, which come into effect on Oct. 1.[14] About 23 financial companies in New Zealand have filed for bankruptcy in a year. Housing starts in New Zealand fell 20 percent in June, the lowest levels since 1986.[2] Excluding apartments, approvals dropped 13 percent from May. Approvals in the year ended June fell 12 percent from a year earlier. Second-quarter approvals dropped 19 percent. The figures suggest a decrease in construction and economic growth. House sales fell 42 percent in June from a year earlier.[15] The New Zealand Treasury concluded that the country's economy had contracted for a second quarter based on economic indicators, putting New Zealand in a recession.[16] New Zealand's central bank cut rates by half a percent arguing the economy was in recession.[17] New Zealand's GDP declined by 0.2 percent in the second quarter putting the country in its first recession in a decade.[18]
References
- ^ Buhrer, Katja (2009-01-09). "Investors are craving crucial hit of confidence". The Australian Financial Review. pp. 20–21.
- ^ a b "Australia faces worse crisis than America". Daily Telegraph. 2008-07-29. Retrieved 2008-07-30.
- ^ National Australia Cuts Bond Sale as Investors Balk
- ^ Apocalypse NAB
- ^ Searle, Jane (2008-07-31). "Arrested Development". Business Review Weekly. Vol. 30, no. 30. p. 73.
- ^ "Australia's Home-Loan Approvals Drop to Four-Year Low". Bloomberg. 2008-08-06. Retrieved 2008-08-11.
- ^ Who can you trust? Michael West, September 18, 2008 - 12:27PM
- ^ "Calls for international community to flush the system".
- ^ "The fall of the little Aussie battler".
- ^ Australia seen sliding into recession in 2009, International Herald Tribune, January 19, 2009
- ^ "Economists warn of ugly year ahead". Australian Broadcasting Corporation. December 31, 2008. Retrieved 2009-01-04.
- ^ Smith, Tanalee (March 4, 2009). "Australia's economy shrank in last quarter of 2008". Associated Press.
- ^ "New Zealand considered to be in recession". Xinhua. 2008-07-09. Retrieved 2008-07-19.
- ^ "NZ Treasury: economy may be in recession already". Reuters. 2008-07-07. Retrieved 2008-07-19.
- ^ "New Zealand Building Approvals Fall to 22-Year Low". Bloomberg. 2008-07-29. Retrieved 2008-08-10.
- ^ "New Zealand 'enters recession'". BBC News. 2008-08-05. Retrieved 2008-08-10.
- ^ "New Zealand slashes rates as economy lurches toward recession". Daily Telegraph. 2008-09-11. Retrieved 2008-09-12.
- ^ "New Zealand Economy Shrank 0.2%, Confirming Recession". Bloomberg. 2008-09-26. Retrieved 2008-09-26.