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More glimmers of hope on economic horizon -

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More glimmers of hope on economic horizon

The World Today - Tuesday, 9 June , 2009 12:14:00

Reporter: Peter Ryan

PETER CAVE: It's a significant call that few international organisations still have the credibility
to make in these uncertain times.

But according to the highly regarded Bank for International Settlements, there are "glimmers of
hope" that the worst of the global financial crisis might have passed.

The declaration comes as other pieces of the economic jigsaw also suggest that a recovery is

I'm joined in the studio now by our business editor Peter Ryan.

Peter, there's been a lot of talk about recovery on the economic landscape. Why does the Bank for
International Settlements have so much credibility?

PETER RYAN: Well Peter, quite simply, the BIS has carved itself a niche in the history of this
crisis for being pretty much on its own in being able to predict it back in 2007.

Now other reputable authorities - such as the International Monetary Fund, the World Bank and the
OECD - have distinguished themselves for the wrong reasons, for not foreseeing the depth of the
downturn and as a result, they've been busy revising and downgrading their forecasts as this crisis
has unfolded.

So now when the BIS - which is sometimes referred to as the "central bank of central banks" -
starts talking about "glimmers of hope" there's an expectation that there might just be something
to it.

PETER CAVE: So what evidence is it citing?

PETER RYAN: Well, in its quarterly review, the BIS cites the recent rally in global share markets,
the mild thawing in credit markets we have been seeing and of course, an easing in volatility and
it says this "budding optimism" has emerged despite most economic indicators remaining at depressed

So basically, investors think conditions were deteriorating less rapidly than before and the
actions from central banks to ease rates and to stimulate households have boosted confidence.

But the BIS is concerned about mounting government debt, especially amid fears that debt in the
United States and Britain might soon reach 100 per cent of gross domestic product.

PETER CAVE: It is not only the BIS. There are some glimmers of hope in a local survey out today,
are there not?

PETER RYAN: That's right and this one is from the National Australia Bank's monthly business
survey. It says business confidence improved in May as financial markets stabilised and that's the
biggest improvement in eight years and it has been fuelled by Budget plans to spend more than
$20-billion to build roads, railways and schools around the country.

But at the same time, the NAB says business conditions are still slipping back on a worsening
outlook for unemployment, which they say will hit around 8 per cent next year. And the NAB has
downgraded global growth to -1.75 percent in 2009 and that is thanks to big declines in Japan and

So the NAB's chief economist Alan Oster says, yes there are signs of stabilisation, but the
improved confidence is tempered with reality.

ALAN OSTER: Business is starting to think that Armageddon is not around the corner and they are
starting to feel a lot happier. When you actually look at how they went in terms of their sales and
particularly their employment, they did however continue to go backwards a little bit so it's more
a case of they are looking forward to seeing growth stabilise and start to recover rather than it
happen straight away.

PETER RYAN: But importantly, coming off a very low base.

ALAN OSTER: Off a very low base and even in confidence, you have still got more pessimists than
optimists but relative to where we were a couple of months ago, it is significant improvement.

PETER CAVE: The National Australia Bank's chief economist, Alan Oster.

Peter, we're seeing those dire expectations of unemployment borne out in the ANZ Job Series, which
has been released this morning?

PETER RYAN: Yes, Peter and briefly job ads on the internet and newspapers fell by 0.2 per cent in
May and this takes the annual fall to 49 per cent.

This is a stabilisation but the ANZ says that job ads remain at recessionary levels.

PETER CAVE: Our business editor Peter Ryan.