The new year starts with recession in the forefront of investors minds. We appear destined for the worst global recession in over 25 years, perhaps the worst since World War Two.
Locally our economy has shrunk for three quarters in a row, the worst run since the 1989/90 recession, and unfortunately there is probably worse to come. Most of the contraction we have experienced happened before the credit crunch started to strangle the global economy. In the last three months expectations for global growth have been slashed. This will flow directly through to the local economy via lower export prices and reduced tourist volumes.
Economic conditions are likely to remain challenging in 2009 as a tug of war between deflationary forces and reflationary policies plays out. While severe secular issues continue to crimp growth, the huge amount of stimulus in the pipeline should restrict the downside.
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