Hockey, Cormann slam rumours of Australia’s recession

The Federal government has ruled out any possibility of recession despite weak economic growth figures. As rumours of Australia heading towards recession circulate, Federal Treasurer Joe Hockey and Finance Minister Mathias Cormann denied the reports and said, "There is no risk of recession in Australia."

Hockey says that the policies adopted by the government have been playing significant roles in strengthening the economy; while the services sectors’ growth have been improving, rapidly recording the fastest rate in seven years, reports the Australian Associated Press.

On Tuesday, the growth rate dropped to the lowest level in two years, recording 0.2 per cent in just three months (May to June). The Australian Bureau of Statistics reported that as major mining and energy exporters stumbled into recession, which resulted in decreased business activities, Australia’s growth faltered.

With various economists indicating Australia’s recession after Canada and Brazil, Hockey has been confident enough to say that Australia would not be next. However, he acknowledged that if Australia doesn’t pay heed to rigid tax regulations, opt for delivering free trade agreements and get rid of taxes, then it would lose jobs and give way to slower economic growth.

Hockey pointed out how weather conditions have affected mineral exports which helped weaken the economy. He also said the dependence on the mining investment have been shifting to other sectors as well because “business conditions outside the mining sector have risen to their highest level” across five years. "Looking forward, we are already two months into the first quarter of a new financial year, and the Government's May budget is already adding momentum to the Australian economy,” he added.

Meanwhile, Cormann conceded that the low growth figures were not indicative of Australia’s recession. "The Australian economy continues to grow, despite the biggest fall in our terms of trade in about 50 years," he told 720 ABC Perth's "Morning with John McGlue." He suggested that Australia should strive towards enhancing the productivity, reduce business operation cost and ensure a competitive market economy.

Even Independent economist Saul Eslake said he is not expecting recession anytime soon. However, he agreed that growth figures were extremely low. With the effects of inflation being excluded, GDP growth was recorded at 1.8 per cent, the weakest figure since 1962. The production of mining also dropped by 3 per cent on the quarterly basis and net exports deprecated 0.6 per cent compared to GDP growth. The Australian dollar also slipped below 69.86 US cents, which is reportedly the first time the currency had fallen to that level since 2009.

Contact the writer at feedback@ibtimes.com.au, or let us know what you think below.