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Australia poised to overtake global economies

18 February 2009 10:44 (UTC +04:00)

Bakuâ€“ APA-Economics. Australiaâ€™s economy will keep outperforming international counterparts because its financial system is in better shape, monetary policy is working and it had more momentum prior to the global financial crisis, central bank Assistant Governor Malcolm Edey said, Bloomberg reports.

â€œThere are reasons to expect that the Australian economy can continue to perform better than its international counterparts in the difficult period that lies ahead,â€ Edey said in a speech in Sydney today, without naming peer economies.

To cushion Australia against a slump in global demand for exports and waning consumer and business confidence, the Reserve Bank of Australia has slashed borrowing costs by four percentage points since September to a 45-year low of 3.25 percent. The government will also spend A$42 billion ($27 billion) on cash handouts to families and on infrastructure.
â€œAs in other countries, substantial monetary and fiscal measures have been taken to support growth,â€ Edey told a conference organized by the Committee for Economic Development of Australia. â€œBut an important difference is that the Australian financial system remains in much better shape than its international counterparts.â€
That means policy makers have been able to gain â€œmuch more tractionâ€ from cuts in official interest rates, particularly for housing loans. The bankâ€™s five interest-rate reductions since September have saved borrowers with an average A$250,000 home loan more than A$680 a month.
Australian home-loan approvals rose in December by the most in almost nine years as the central bankâ€™s rate cuts and government handouts spurred first-home buyers. To prevent a collapse in property prices and boost house building, the government in October tripled a grant to first-time buyers of new homes to A$21,000.
Another factor helping to insulate Australiaâ€™s economy is the depreciation of the local currency, which has tumbled 35 percent against the U.S. dollar since reaching a 25-year high of 98.49 U.S. cents on July 16 last year. That has boosted the local value of exports such as iron ore and coal.
The Australian dollar traded at 63.42 U.S. cents as of 9:27 a.m. in Sydney from 63.36 U.S. cents just before Edeyâ€™s speech. It has declined 1 percent from 64.06 cents late in Asia yesterday.
Australia also â€œhad more momentum than most comparable economies in the period leading into the crisis,â€ Edey added.