We outran recession, Aussies say

CANBERRA - Independent forecaster Access Economics expects Australia's jobless rate to peak at 6.8 per cent by next June as the economy returns to "trend growth" in early 2011.

But Access economist Chris Richardson says this does not mean Australia has got off scot-free, predicting the Reserve Bank of Australia (RBA) will have lifted the cash rate to 5 per cent by then.

Releasing Access Economics' latest Business Outlook yesterday, Richardson said Australia's growth performance had been world-beating, admittedly against a "bad bunch of global peers".

"We didn't dodge a bullet, we outran it," he said. "We sailed through the worst of the global crisis on a sea of stimulus - both our own and China's."

He said that as Australia's jobs market had been more flexible than in previous recessions, people lost working hours rather than jobs - resulting in unemployment peaking at 6.8 per cent by mid-2010 in the forecaster's projection.

This would be substantially less than the 8.5 per cent predicted by the Government in the May Budget by mid-2011, and just below 7 per cent recently estimated by the International Monetary Fund.

Richardson expects price pressures to remain in hibernation in the coming year, aided by a resurgent Australian dollar and a slowing pace in wage claims.

But the recovery will see underlying inflation back at or above 3 per cent by early 2011, the top end of the RBA's inflation target.

By this time he expects the economy to be back at 3 per cent trend growth.

However, there are risks to this outlook stemming from a global "double dip" recession led by China.

"China's recovery is remarkably good. However, the better that China does in 2010, the greater the risk that it weakens in 2011, bringing down commodity prices with it."

China's imports of coking coal quadrupled in the first half of this year compared with the first half of last year and imports of copper and thermal coal more than doubled.

"Those numbers should tell you that what is happening in China is not a return to sustainable growth."

- AAP