Australia faces Recession

Australia's Choice: Interest rate cut or a recession

IT'S official, the Reserve Bank Of Australia has gone too far with its relentless run of interest rate rises, with economists now calling for urgent rate cuts to save the country from full-blown recession. Grim economic data released by the Australian Bureau of Statistics yesterday had our leading economists fearing the worst, with some claiming a retail recession has already arrived.

The data showed sales for the first half of 2008 had experienced the biggest slumped since records began almost 30 years ago. Morgan Stanley economist Gerard Minack said sales had fallen so dramatically it was placing thousands of jobs at risk.

"It can only be a matter of time before retailers - the largest single employer in the country - start to fire their workers," he said. The ABS figures show consumers, battered by interest rates, soaring fuel and food prices and rapidly rising rents, have dramatically reined in their spending in almost every category.

AMP Capital chief economist Shane Oliver urged the bank to drop rates immediately to ease the consumer pain and steer the economy out of recession. "The RBA went too far with its rate hikes. Nobody wants to see retail spending falling as quickly as this," he said.

The Pound to Australian Dollars today took a battering and the best australian dollar exchange rate is currently 2.1000