Economists forecast Australia to defy Europe's financial chaos

12:58, June 10, 2010      

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Europe's debt crisis has thrown a spanner in the works of a global economic recovery, but an independent forecaster on Thursday predicted Australia should still strengthen this year.

Access Economics said Australia sells more to emerging economies than to the "rich world", so 2010 should see the broader economy rebound further.

This included the retail sector which, while having been restrained by rising interest rates, should be supported by very strong jobs growth.

Releasing its quarterly Access Retail Forecasts on Thursday, director David Rumbens said rising house prices and retail spending normally go hand-in-hand because of the increased wealth effect.

However, an inverse relationship has developed between the two in recent months as rising home loan costs have left less room in the household budget for shopping.

"Retail sales growth over the nine months to March 2010 was just 0.3 percent, a less than satisfactory result," Rumbens said in his statement.

While rising interest rates has been hurting retailing, it should also take the "zing" out of house price growth, Rumbens said.

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