The local economy may continue to perform better than the rest of the world despite forecasts suggesting 2009 will be the worst year since World War II, the Reserve Bank said today.

Australia has benefited from having “more momentum than most comparable economies in the period leading into the crisis,” said RBA assistant governor Malcolm Edey in a speech delivered to the Committee for Economic Development of Australia in Sydney.

“There are reasons to expect that the Australian economy can continue to perform better than its international counterparts in the difficult period that lies ahead,” he said.

Mr Edey highlighted the steep drop in growth forecasts and the “synchronised nature of the downturn” affecting the global economy, together making 2009 shape “up as a very difficult year.”

In July the International Monetary Fund’s world growth forecast was 3.9% . By late January the IMF had scaled the expectation back to 0.5%.

However, one area of advantage for Australia is that its “substantial monetary and fiscal measures” will likely have a more pronounced impact on the local economy than elsewhere, he said.

The Reserve Bank has chopped four percentage points from the official cash rate since September, just as the global financial crisis gathered pace. This month the rate fell another percentage point to 3.25%, the lowest since 1964.

Because the majority of Australian mortgages are variable rather than fixed, interest rate reductions pass through to consumers quickly, easing the burden of repayment for a greater number of mortgage holders than in other parts of the world.

“We have been able to gain much more traction from cuts in official interest rates,” he said.

“This is in marked contrast to other countries, where banks have been more heavily affected by financial strains and the degree of pass-through has been much more limited.”

Mr Edey also said the weakening Australian dollar has helped the economy by making local exports more attractive to trading partners.

The dollar, which bought 98 US cents in July, was buying 63.6 US cents this morning, according to Bloomberg.

czappone@fairfax.com.au

http://business.smh.com.au/business/australia-better-able-to-weather-economic-crisis-rba-20090218-8am7.html?sssdmh=dm16.361262