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KNN... my dream of owning a home in Mel is gone.. looks like the ppty is not going to go down..

Australia's economy shrank in last quarter of 2008
Australia's economy contracted in final quarter of 2008, sparking recession fears

* Tanalee Smith, Associated Press Writer
* Wednesday March 4, 2009, 1:27 am EST

* Yahoo! Buzz
* Print

SYDNEY (AP) -- Australia's economy shrank 0.5 percent in the last quarter of 2008, the government said Wednesday in an unexpected announcement that suggested the country may be entering a recession.

The news of the economy's first contraction in eight years surprised economists who had expected the Australian Bureau of Statistics to report a slight increase in gross domestic product. But the bureau said GDP fell by 0.5 percent in the last quarter in seasonally adjusted terms.

Australia is not yet in a recession -- technically two consecutive quarters of contraction -- because a narrow rise of 0.1 percent was reported in the third quarter. Growth slowed to just 0.3 percent for the year, underlining how quickly Australia's resources-based economy has slumped since the U.S. financial crisis sent shockwaves around the globe in the middle of last year.

The stock market immediately dropped and the dollar fell but government officials tried to put a positive gloss on the numbers, saying that Australia was still doing better than many nations.

"Our economy did contract in the December quarter, but by far less than other developed economies," Treasurer Wayne Swan told a news conference. "This is a sobering but unsurprising outcome, because I think it does illustrate the full impact of the magnitude of the global recession and how it's impacting on this country."

Swan said the "biggest global downturn in living memory" had unfolded during the fourth quarter.

The benchmark S&P/ASX 200 stock index fell nearly 2 percent before regaining some ground to close down 1.6 percent at 3,166.4 points. The dollar fell more than half a U.S. cent to 63.28 U.S. cents.

Adam Carr, a senior economist at broker ICAP Australia, said the contraction came as a shock.

"The partial indicators had suggested we were getting something more positive," he said. "The picture being painted is an economy where demand is weak, although doing a lot better than globally."

He said the news would not be good for consumer or business confidence. "It puts us that much closer to a recession."

The contraction came despite the efforts of the federal government and the Reserve Bank of Australia to prop up the economy. The government passed two multibillion dollar stimulus packages in the last few months, and the central bank cut its key interest rate by 3 percentage points from September to December last year.

The bank slashed another 1 percentage point in February, to a 45-year low of 3.25 percent, but on Tuesday held rates unchanged, explaining that the Australian economy was weak but "has not experienced the sort of large contraction seen elsewhere."

Prime Minister Kevin Rudd said the stimulus package had cushioned the impact, as reflected by the fact that in the December quarter Australia was among the top five performing economies in the industrial world.

"Australia cannot continue to swim against the global economic tide," he said. "Had the government not introduced the stimulus package at the end of last year, the impact on Australian jobs and the Australian economy would have been worse."

In February, parliament passed a 42 billion Australian dollar ($26.5 billion) stimulus package, adding to a AU$10.4 billion package launched late last year.

Swan said a lot of that money would still flow through the economy in coming months.

Asked whether Wednesday's announcement meant a technical recession was likely, Rudd said the government would do what was necessary to get through the crisis.

"We believe we have a strategy which will see Australia through this crisis and we are embarked upon that strategy," Rudd said.