AUSTRALIAN ECONOMY NEEDS MORE INVESTMENT, BANK
Australia faces the risk of recession if
capital expenditure does not grow from the subdued levels of
recent years, the Commonwealth Bank of Australia said.
    "Without stronger levels of capital expenditure, the
structural adjustment that is so critical to overcoming the
economy's fundamental problems cannot occur," the bank said its
latest Economic Newsletter.
    "In that event, Australia would be destined to experience a
prolonged period of sub-par growth at best, with the very real
risk that the onset of serious recession would become
unavoidable," it said.
    Australia's medium-term economic performance will be
fundamentally determined by business investment in the period
immediately ahead, the bank said.
    It said spending has been disappointing in recent years due
to low capacity utilisation, low expected profitability and
very high real interest rates.
    There also appears to be little likelihood of any
significant improvement for the present, it said.
    Investment is strongly influenced by medium-term
uncertainties and risks and these are likely to continue for
the present, it said.
 REUTER
