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Economic analysis with Stephen Long -

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Reporter: Leigh Sales

LEIGH SALES, PRESENTER: Here is our usual Friday night chat about all things economic. I'm joined
by Economics Correspondent Stephen Long.

Stephen, the British economy seems to be in a very bad way looking at the numbers.

STEPHEN LONG, ECONOMICS CORRESPONDENT: Well bad probably understates it, Leigh. We've seen growth
fall in the first three months of this year by 1.9 per cent after a 1.6 per cent fall in the final
quarter of last year. That's an annual fall, year on year, of more than four per cent, and that
hits a whole lot of milestones that you don't really want to hit. It's the biggest quarterly fall
in GDP in Britain since 1979 when the 'Iron Lady' Margaret Thatcher was in power; the biggest
annual fall since 1980; the biggest fall in total production output since 1974, and the biggest
quarterly fall in manufacturing output since records first began just after the Second World War.

LEIGH SALES: Unbelievable. And those figures on the slump in growth come just a day after the
British Government handed down a Budget with a record deficit. What's been the reaction to that?

STEPHEN LONG: The reaction to the British Budget has been quite serious. Moody's, the global credit
ratings agency, has basically put Britain on notice that it's in a situation where they are
doubtful, or they have some doubts - they've expressed doubts that it will retain its triple A
credit rating. Now, it's couched and qualified, as my couched and qualified description might've
implied, but nonetheless, that has sent the British currency absolutely tumbling. The wonderful FT
Alphaville blog described the graph of the pound against the US dollar as looking like a child had
got hold of an etch-a-sketch and you saw "Zoop!", you know, falling off the cliff.

LEIGH SALES: Nothing couched and qualified about that assessment.

STEPHEN LONG: No. And British bonds have risen naturally enough on anticipation of the huge deficit
and possibly inflation down the track. Now Britain is looking at a budget deficit of about 12.5 per
cent of GDP, or that was the forecast. It is now going to be worse than the forecast. There's no
way that those estimates that Alistair Darling released are going to be met with this dramatic fall
in GDP. So, you're going to be looking at a worse Budget outcome, a higher deficit and possibly
longer. And, so, things aren't too good over in the UK.

LEIGH SALES: I notice as well, Stephen, that the leader in this week's 'Economist' magazine says
that the talk of "the green shoots of recovery" is overstated?

STEPHEN LONG: Oh, the green shoots have really shrivelled up and died. And it's interesting, Leigh,
because the informed economic journalists and commentators were all dismissing this notion of the
green shoots, or by and large the vast majority, but political commentators and a lot of political
journalists were seizing on the rhetoric. You've got to understand there's a lot of rhetoric coming
from political leaders and central bankers at the moment who are trying to inspire some confidence.
But objectively, most of the numbers are still getting worse at this stage. And the green shoots
usually refers to growth. What they're referring to when they talk about green shoots is generally
things getting worse at a slower pace.

LEIGH SALES: Well, we always want the facts and not the spin. Stephen Long, thanks very much.

STEPHEN LONG: That's what you'll get.