The housing market is likely to lead the Australian economy out of recession with the business sector set to remain depressed for the rest of this year, Westpac's chief executive Gail Kelly said today.
As rising bad debts are now spreading to small and medium-sized companies, Westpac has forecast that lending to businesses will show little or no growth for the next six months and may actually go backwards given the economic downturn.
But Mrs Kelly said the housing sector was holding up, helped in part by the benefit of the Federal Government's first-home buyers grant which is due to end on June 30.
Lower interest rates which had fed through to a cut on monthly mortgage payments, a lack of subprime lending, no overhang of unsold housing and a gradual fall in house prices would all help to underpin the economy especially once buyers grew in confidence that the slowdown was moderating, she added.
Nonetheless, the debate in Australia was how long and deep the recession would be compared to the discussion at the end of 2008 when commentators were discussing the prospect of the country avoiding such a slow down, Mrs Kelly said.
She is also more circumspect about a rapid recovery as some analysts are predicting. "When the recovery re-emerges it will be a slow haul,'' she told an analysts briefing this morning.
djohn@smh.com.au
SMH
