Two key plans announced were the U..S Fed pledging a further US$750 billion to buy mortgage backed securities and the U.S. Treasury announcing its Public-Private Investment Program aimed at removing toxic assets from banks balance sheets to encourage lending, thereby restoring financial system stability.

Economic conditions remained bleak in other major nations with the exception of China, which saw manufacturing conditions improve and credit growth strengthen. In Japan, business investment has dried up, exports have fallen and unemployment has hit three-year highs. Business and consumer confidence continues to weaken in Europe with unemployment at its highest level since November
1983 and the latest data on the UK shows the economy contracted two per cent over 2008, with unemployment at a ten year high of 6.5 per cent. 

Domestic economy

Australia’s GDP fell by 0.5 per cent in the December quarter, being the first quarterly contraction since December 2000 and bringing year on year growth down to 0.3 per cent. Business confidence continued to fall to new lows and we saw unemployment jump in March by the most since the economy was last in recession in 1991. The unemployment rate is now 5.4 per cent rising from 5.2 per cent in February, but then falling by 0.3% recently. Consumer spending, despite showing promising signs in December and January, fell again in February with retail sales dropping 2 per cent. This confirmed the positive impact of the Government transfer payments in December, however it also highlights that additional stimulus is needed to support further spending in the immediate term, which will potentially come from the current $900 Government program.

Investment markets

Global equity markets rallied strongly in March posting the best monthly returns since 2003 after falling to new multi decade lows at the start of the month. The rally continued for most of the month and saw emerging markets outperform most other major share markets. Benefiting from a drop in global risk aversions and hopes of a rebound in economic growth, the MSCI Asia ex Japan Index rose 10.5 per cent in March and moved into positive territory for the quarter. Movements were:


Outlook

Despite an unprecedented amount of monetary and fiscal stimulus in the pipeline, and the sheer determination of government authorities and the IMF to kick start growth, a global economic recovery is still likely to be some months away: late 2009 or maybe even 2010. However, the global policy response to the crisis is beginning to gain some traction and with our knowledge that investment markets usually lead the economy by six to 12 months, perhaps the recent rally we have seen is a sign of positive things
to come.