the economics team at three leading investment banks, the Australian economy is slumping right now and will continue to worsen well into 2009 at a rate lower than the forecasts from Treasury and the Federal Reserve.
The economics team at Goldman Sachs JBWere and Merrill Lynch have lowered their estimates for 2008 and 2009 economic growth for Australia and are now predicting a recession.
and ABN Amro expects the economy is now stalling and growth is near zero.
you all agree that will leave as a result of the federal budget into deficit, unemployment will climb to seventh 5%, and the Reserve Bank to cut interest rates to a low of 3. 5% hit, one point late last week and by the Macquarie Bank interest rate strategist Rory Robertson.
He and the two teams now say that we have a 1% rate cut received by the Reserve Bank at its meeting next Tuesday, which will take the cuts since September, by 3%, a measure of how serious the RBA times what happens in the economy.
But Debt futures markets are tipping the RBA’s cash rate by a massive one cut. 25% next Tuesday, which, if it happened, the biggest official growth rate would be reduced since the recession of 1990.
ABN Amro chief economist Kieran Davies said a shrinking Australian economy, falling house prices and the recession as levels of business confidence, the RBA more inclined to cut rates aggressively.
“The wealth effect of falling asset prices is snowballing and the Chinese economy is slowing down very much. We also believe the economy is now contracting. We are close to zero.”< / p>
A first set of 25% in December would be cut to take the cash rate to 4%.
The cash rate was 25% at the end 4th 2001 and not below that level since the RBA Cash Rate Target publication began in 1990.
economists point out that the debt futures market indicates a low cash rate of around 3%, the lowest level since 1960 for the prices when the credit crunch hit this year and
Federal Treasurer Wayne Swan still claims the budget will not go into deficit: the Forecasts expect, and they were supported by the latest update from the well-connected team of Access Economics in Canberra. (source).
Goldman Sachs JBWere’s downgrade follows one in the United States from their Economics Group It said the U.S. on Friday:
Goldman Sachs, the U.S. GDP will contract was at an annual rate of 5% in the current quarter and to decline 3% to 1% in the next two quarters.
It said in a note to U.S. unemployment rate will reach 9% by that date next year. In contrast, the Fed expects the unemployment to get to 7. 6% next year (it’s 6th 5% at the moment). Collapsing U.S. bond yields reveal considerable scope and need for fiscal measures. Fed officials appear for more aggressive steps.
This morning in a note to clients over the weekend, said Goldman Sachs JBWere:
“We have revised our economic growth forecast from 2 0% in 2008 and 1 7% in 2009 to 1 8% in 2008 and 1 0% in 2009.
The new projections assume a deeper recession than we are by 2H08 first forecast in early October and a shallower recovery path through 2H09.
“We have revised our interest rate forecasts, with the RBA now expects the cash rate cut to third 5% of March 2009 (75bp lower than our previous forecast). < / p>
“The combination of dramatic financial wealth destruction, crippling tightness in money markets, loans slowed rapidly growth, sharp drop in commodity prices and the evidence that Australian house prices fall led us to adopt a formal recession in Australia Our basic view is displayed on 12 October.
“Since that time, our belief that Australia will be its first recession in 17 years, balanced, have intensified.
” The reduction in raw material prices by our resource-strategy team suggests that Australia reduced terms of trade is ~ 20% over the year end of 2009 sufficient to around 3 strips. 0% of the growth in domestic demand.
“We now expect business investment to fall to seventh in 2009 was 0% (-1. 7%) and domestic demand growth of only 6% in 2009 was 0th (1 . 8%). As such, we have raised our estimate of the unemployment rate of 6 5% by the end of 2009-7. 5%.
“We believe economic growth will contract – 0 . 5% in the September quarter, -0. 3% in the December quarter and -0. 1% in the March quarter. ‘/ P>
“This would be enough to see GDP decline -0. 6% year over year in the March quarter 2009 and -0. 3% yoy in the June quarter of 2009 before accelerating +3. 25% year on year in December 2009 to clot than the combined effects of interest rate cuts, A $ weakness and fiscal stimulus in the 2H09 and drive a recovery in demand.
“We remain convinced that the Australian economy is in a debt-deflation cycle. The risk of deflation was home, all policy-makers brought by the sharp decline in U.S. inflation in October.
“Basically, we believe that the risk of deflation (no matter how small) plans are of interest rate cuts accelerate, and we now expect the RBA interest rates in December, 100bp, 50bp cut at its next meeting in February and a further 25 basis points in March.
“This will be the RBA cash rate to 3 instead. 5% by March 2009, a 375bp cut cycle since September 2008.
“We believe the government should be less worried about protecting an underlying surplus and more about the conditions that promote aggregate demand growth. ‘br /> “We have downgraded to check our market forecasts, the reality because of the current market turbulence, and incorporating the latest changes to our forecasts and forecast domestic product growth.
“Reduced our FY09 EPS Industrial top-down forecast of -5. 0% to -15. 0% (bottom-up forecast is +3. 3%). – Our Resources reduced FY09 EPS growth forecast of 0 to -15% 0. 0% (bottom-up +4. 4%) and our FY10 from +15% to -5. 0% (bottom-up +20%).
“Our revised forecasts for the ASX200 are: Dec’08: 3400 (previously 4525, -25%) – Jun’09: 3780 (4975, -24%) – Dec’09: 4100 (5350, -23%). The ASX closed yesterday at 3374, so it is already qualified for the 2008 estimated GSJBW. is “
Merrill Lynch said yesterday:
The Australian economy from the global financial crisis and external growth shock, impaired credit markets, overwhelmed collapsing asset prices and imbalances in the household sector balance sheet.
We are downgrading our 2009 GDP forecast to 0 2% (previous year: 1 7% previously). < / p>
From our perspective, the very substantial monetary and fiscal policy response and adjustment of the exchange rate will not be enough to avoid a recession over 1H2009.
Our leading indicator of economic trends and conditions are to ensure a rapid slowdown in domestic demand growth was in the next 3-4 quarters.
Lead indicators of employment (and income growth) deteriorated significantly in the last quarter.
Our downgrade to GDP growth covers all components of the private demand (household expenditure, housing and business investment) and exports.
Business investment will be particularly adversely affected by the global recession, the decline in the terms of trade and the tightening in the supply of credit.
Global leading indicators have fallen deeply in hard landing area. ML global growth forecast of only 1 5% in 2009, compared to 4% in 3rd 2008th
The sharp fall in asset prices in the last 12 months and need for households to savings and increased de-leverage a very weak outlook for household spending by 2009, set aside, despite the cash-flow relief from lower interest rates and petrol prices.
We understand that the job market to weaken significantly, fell in the next 12-18 months, with job growth at -2. 0% by the end of 2009 and the unemployment rate rose to 7 . 5%.
The saving rate of households is expected to rise to that third 75% (stepped from 0 to 9% at present) as de-use.
We are optimistic about 2010, with significant global and domestic policy impulses expected to support a recovery in growth. We expect that GDP growth in the second of 2% in 2010, first from an economic recovery housing Activity LED and strengthening of global growth.
We understand that the RBA to cut the cash rate to third 5% Q1 2009 as a response to the global downturn, the deep slump in growth in domestic demand and inflation pressure reduced.
The focus of the policy over the next 6-9 months are addressing falling corporate and household income growth, the risk of aggravation of deleveraging going on in the economy .
and Friday:
run Citigroup global economic team has its weekly update with these gloomy forecasts:
financial conditions in the United States to continue to deteriorate, making the downside.
ready with a deepening of recession in the euro zone, inflation is expected below the ECB target, we, the ECB interest rates by 1% low-to mid-2009 to expected.
The Japanese economy is expected to continue declining, and we expect the BoJ cut interest rates again.
The UK economy has a long, deep contraction. But substantial policy action should eventually generate a recovery. 
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