Australia’s economy continues to strengthen

Given Australia's relative resilience in the face of epic global headwinds, local economists were decidedly more upbeat about the nation's success in fending off disaster.
 

"There is no longer a crisis," AMP Capital chief economist Shane Oliver said.

"We are still dealing with the aftermath of it but the fact that share markets are recovering, credit markets are returning to normal and the economic indicators are starting to pick up, suggests that the global financial crisis is history."

Backing the diagnosis yesterday were figures showing the biggest surge in building activity in four years - and signs that local bank shares, long the barometer of the health of the Australian economy, are back in favour.

Australian Bureau of Statistics data showed residential building approvals increased by a massive 9.3 per cent in June as consumers buoyed by low interest rates, government grants and market optimism signed on the dotted line to fulfill the Great Australian Dream.

And global financial giant Citigroup, which declared now was the time to snap them up, announced the recovery of Australian bank shares, which have been sold down mercilessly since the onset of financial turmoil.

Following better than expected profit forecasts from Macquarie Group recently, Citigroup slapped buy recommendations on all four major banks. Citigroup analysts said they had become increasingly optimistic about the local banks in light of Australia's improving macro-economic outlook.

The glowing endorsement spurred the Australian share market to its highest close since November 6 2008, with investors pouring back into bank shares en masse.
Since hitting bottom in March, the share market has risen almost 36 per cent, culminating recently with 11 straight days of gains.

Commonwealth Bank benefited the most from the splurge, surging ahead 4.31 per cent to close at $41.62, while ANZ and National Australia Bank posted gains just under four per cent.

"With evidence continuing to mount, we now believe that the economic downturn in Australia will be less severe than we had previously anticipated. Given this, we are becoming more optimistic about the outlook for the major Australian banks," Citigroup bank analyst Craig Williams said.

Investment house Perpetual also flagged the death of the economic crisis, based largely on the declining cost of money borrowed by banks.

Commsec chief economist Craig James said: "There are plenty of grounds for optimism. It is a case of the glass now being half full instead of half empty. The worst is definitely behind us".