The Feds have indicated the stimulus spending will be phased out in the coming months. This could be premature for a number of reasons. Gross domestic product figures out on Wednesday showed the economy expanded by 0.6 per cent between April and June compared both to the previous quarter, and the same period a year before.   The Treasury estimated that the economy would have contracted by 1.3 per cent year-on-year without the stimulus programme.

Australia’s latest GDP numbers were boosted by robust contributions from the household sector and business spending on machinery and equipment. But mixed signals coming out of global economies are too confused to be popping champagne corks just yet

Treasurer Wayne Swan said the return of business investment and global growth would allow Australia to wind back stimulus measures which had always been temporary in nature. A robust banking system and strong exports during much of the global downturn have helped the economy outperform its peers. Government fiscal stimulus measures worth A$42bn have also promoted job creation in the retail and construction sectors, two of the nation’s biggest employers.

However, global markets strategists  have warned that Australia is suffering from broad based deflation and that prices for the products it is producing, including coal and iron ore, are falling.  The number of hours worked by Australians had fallen for three straight quarters, that GDP on a per capita basis has been flat, and that the country’s terms of trade had dropped by close to 18 per cent in the last three quarters.

Australia is performing better than most in this global financial and economic crisis but that doesn’t mean it has escaped all the misery that the crisis has imparted on the world. The see sawing of sharemarkets, global unemployment figures and the rush to staple blue chips this week are not signs of a correction. Rather profiteers have pushed the bluff as high as possible then sold off and headed straight for safe havens.

The global situation still has many hurdles to jump in the recovery stakes,and any premature raising of interest rates may just well scare consumers back out of the market and into austerity overdrive, once bitten twice shyer mode. This would be disasterous and would signal business that private investment plans might have to simmer for another 6-9 months.

Tasmailbag has panned some stimulus spending on bailouts of inefficient companies and has also raised concerns about  Americas Fed printing money out of thin air (quantative easing).The Australian government has  been more responsible in those regards,but we are still subject to the ebb and flow of global markets and economies. The so called "green shoots" still need rain,fertalizer,careful pruning and good gardening skills in order to blossum. All that is still in play not transition, so caution is still needed before we can claim victory..