Australia set to mark 21 years of growth

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Australia’s 20-year run of economic growth looks set to continue, with GDP forecast to grow at 3.4 per cent in 2012, according to the latest HSBC report.

While Australia’s success is partly down to luck (through proximity to a resource-hungry Asia), it is also a testament to the work of policymakers who "are well equipped to deal with potential problems", said HSBC.

Importantly for Australia, the report predicts a soft landing for China – despite HSBC’s prediction of a European recession in 2012. The Chinese authorities do not have as much capacity to boost credit growth as they did in 2008-09, given their current policies to ease property prices and keep inflation under control. However, HSBC is confident that Chinese policymakers have a "large toolkit" that they can use to control economic conditions.

The 25 per cent appreciation of the Australian dollar against the US dollar will not be repeated, which will help rebalance the Australian economy, said the report.

HSBC also played down fears about a potential housing bubble in Australia, pointing out that around three-quarters of household debt is held by Australians in the top two income tiers.

The report also predicted the Reserve Bank of Australia would continue to cut interest rates in 2012, a move that would support the weakest sections of the economy (which are the most interest-rate sensitive).

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