By Adam Coleman

Leading economic forecaster, Access Economics released its Business Outlook for December 2008 today which warns Australia will fall into recession this year.

The forecaster suggests NSW is already in recession and that Queensland and Western Australia will be hit hardest by the global economic downturn.

“NSW is already in recession, Victoria is on the brink of it, Queensland is slowing fast, and WA is now eating its way through the pipeline of construction started during the boom,”  the report said.

Access cautiously predicted a recovery after late 2009, dependent on unemployment and on housing prices which it forecast to soften by between five to eight per cent.

"Really big and bad news is headed our way," said Access Economics director Chris Richardson in the report.

“Conditions are worsening very rapidly. This is not just a recession, it will be the sharpest deceleration Australia’s economy has ever seen.”

Australia’s prosperity will be ravaged by a slowing Chinese economy and a ‘buggered’ Federal Budget will fall into deficit, it says.

“The collapse in commodity prices will, with a lag, mean a collapse in company taxes. But it is not the short term implications of deficits which worry us. It is the longer term risk of chicken-hearted policymaking now that Canberra’s ‘rivers of gold’ are drying up.

“This nation has legitimate policy goals in education, infrastructure, Federal/State relations, climate change and water management. What it doesn’t have any more is the money to help achieve reforms in those areas.”

Access Economics also predicted that:

• Global growth in 2009 will be significantly worse than at any time since the early 1990s, and possibly the worst in decades;
• Australia’s recent prosperity will unravel "scarily fast” on the back of a Chinese economic slowdown;
• Australia’s inflation will plummet, as petrol prices come down and retailers and wholesalers cut margins;
• The Reserve Bank to take out insurance by cutting the cash rate to 2½ per cent soon
• The $A may fall to US56 cents later in 2009;