Having been less affected by the crisis than most other OECD countries, Australia is likely to experience a relatively more robust recovery. Large public transfers and tax incentives stimulated private consumption and capital expenditure by firms. In addition, strong imports by China and other dynamic Asian economies buoyed exports of mining products. Growth is projected to pick up to 2.5% in 2010 and 3.5% in 2011, with unemployment peaking at around 6.25% in 2010 and inflation moderating.

The international crisis has not spared Australia, even if its impact will be less severe there than the OECD average. Weaker foreign demand and its repercussions on the domestic economy are expected to pull down GDP by 0.4% in 2009, followed by growth of only 1.2% in 2010.

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The global economic crisis is affecting families and communities across the planet. With regions bearing the brunt of the crisis, affecting businesses, jobs and people generally, regional policies are very much part of the solution.

GDP growth could well weaken from 2.5 % in 2008 to around 1.75 % in 2009 before picking up to 2.75 % in 2010. This would still imply that, despite the depressed international environment, the impact of the financial crisis and the fall in the terms of trade should be relatively contained. Unemployment is likely to increase, however, and inflation may dip below 3% in 2010.

Output growth, which could reach 4.25% in 2007, is expected to slow gradually to 3.5% in 2008 and 3% in 2009, a pace close to the potential growth rate. This slowdown, which will be accompanied by a further tightening of monetary policy to keep inflation in line with the Reserve Bank’s inflation target, should ease strains in the labour market.

If ever you are unsure about the advantages of open trade, why not take a lead from students in economics and consider the story of Robinson Crusoe. Generations of students have discovered how Crusoe, shipwrecked on a desert island and cut off from the outside world, improved his welfare as he became economically re-integrated into the wider world.