Chance that business investment will be hit in June
There is a reasonable chance that small business investment will be hit in the second half of 2009, according to John Edwards, the chief economist for HSBC.
Imports will also decline as business investment drops, Edwards said.
However, he has questioned the widely held view that the last quarter of 2008 was the start of a global economic decline, saying it could have been a one-off shock event to the world economy. Edwards cited the example of China’s gross domestic product, which is down in the current market climate, but could pick up again and reach 7.8 per cent by the end of 2009.
The global financial crisis was not completely responsible for the shrinking in the economy, Edwards said, as retail growth had been slowing for the four consecutive quarters preceding the global financial crisis due to high petrol prices and rising interest rates.
Craig James, the chief equities economist at CommSec, said there were risks and opportunities to be had in all markets, and the share market could recover even if there were job losses in the economy.
James also said the economic package and handouts being proposed by the Government would stave off a recession for at least one year, boosting investor and consumer confidence.
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