This note looks at the outlook for the Australian economy.

The key points are as follows:

– Australia has so far had a very mild economic downturn compared to other countries and its own history.

– However, its likely that the economy went backwards in the June quarter and that this will continue into the current quarter. This along with falling inflation and rising unemployment, is likely to prompt more interest cuts over the next 6 months.

– Later this year and through 2010 sustained recovery is likely to kick in driven by the rebound in China, a recovery in housing construction and rising public investment. In the meantime economic indicators are likely to be a mixed bag.

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