Treasurer: Australia economy strong despite jitters

Australian Treasurer Wayne Swan insisted the country's economy was strong Saturday following a slump in consumer confidence and retail spending which left some analysts predicting an interest rate cut. Strong Asia-driven demand for its mining exports helped Australia emerge from the global downturn as the only advanced economy to dodge recession but high interest rates and offshore debt worries are rattling the public. Consumer confidence slumped 8.3 percent this month to recession levels and retail stocks dived Thursday after top-end department store David Jones slashed its profit forecasts due to an unprecedented and dramatic slowdown in sales. Australia's economy suffered its worst contraction in 20 years in the first three months of 2011 after flood and cyclone emergencies damaged mines and crops, with growth shrinking 1.2 percent on-quarter. A second quarter of negative growth would see it declared in recession for the first time since 1991. Major bank Westpac said the Reserve Bank would likely begin slashing interest rates to buoy confidence, tipping a 25-point cut in December to 4.50 percent and further reductions to 3.75 percent by the end of 2012. "Interest rates are too high in Australia given the state of the non-mining sectors of the domestic economy and a downward adjustment is required to avert a damaging round of contraction," Westpac economist Bill Evans warned Friday. Swan said there were "risks in the international economy" and people were clearly worried about debt ructions in Europe and the United States but Australia was in a strong position, with near-full employment and good growth. "It is true that consumers in Australia are now more cautious and they have been like that for some time," Swan told reporters. "That is the response we’ve seen from Australian consumers to international uncertainty, but Australians can be assured that our economy will continue to grow and will continue to create jobs." Though Australia was "not immune" to global issues Swan said it was well placed to weather economic shocks, with a strong pipleline of mining investment and strict financial regulators. "The Asia-Pacific and Australia are certainly stronger than those other two regions in the global economy," he said of the problems in the US and Europe. "What we’ve got to do is keep our economy growing strongly and the government has put in place a set of policies to keep the economy growing. We’re not immune from international events but our fundamentals are strong."