Was the start of the year really that bad?

With equity prices still more than 10% below last year’s highs, employment having contracted for two months in a row and leading economic indices slumping, a visitor from Mars would be forgiven for thinking that the Australian economy is in recession. The reality is very different. That said, we still believe that GDP growth won’t accelerate at all this year from 2.3% last year and that the Reserve Bank of Australia will eventually cut interest rates from 2.0% now to 1.5%.