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Credit crunch eases but jobs crisis grows

By Henry Thornton - posted Tuesday, 7 July 2009

THE global recession continues to worsen, but the Australian economy is showing signs of recovery.

I would be surprised if the Reserve Bank cut rates today, though it may reiterate its continued readiness to do so.

US employers slashed 467,000 jobs in June, 100,000 more than expected. That lifted the unemployment rate to 9.5 per cent, the highest rate in nearly 26 years.


The next milestone expected by economists is 10 per cent, with many economists expecting the post-World War II high of 10.8 per cent unemployment, set during the Reagan administration in 1983, being topped by Christmas.

The global share price recovery was widely interpreted as due to anticipation of global economic recovery.

The recent falls in equity markets show there is new uncertainty, and the loss of confidence by market participants will have an adverse impact on many households and businesses.

Britain, Germany and Japan are all experiencing their most severe economic downturns and Europe overall is struggling almost as much, with unemployment also at 9.5 per cent.

The eurozone banks still have not "cleansed" their balance sheets, and this remains as a possible flashpoint.

Globally, however, credit is becoming easier to get, but the credit crisis is being replaced by a jobs crisis.


China is defying the global trend as its massive fiscal stimulus is reigniting rapid economic activity.

There has been a surge in China's exports to other developing economies, and this is a sign that underlying global imbalances are far from resolved.

The biggest imbalance of all is the developed nations' continued reliance on borrowing and lending, and the automatic resort to deficit spending financed by additional borrowing merely entrenches this imbalance.

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This article was first published on July 7 in The Australian

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About the Author

Henry Thornton (1760-1815) was a banker, M.P., Philanthropist, and a leading figure in the influential group of Evangelicals that was known as the Clapham set. His column is provided by the writers at

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