MELBOURNE - AUSTRALIA is heading for a recession, according to a monthly economic index compiled by one of the country's largest banks released on Wednesday.
The monthly Westpac-Melbourne Institute leading index, which predicts the likely pace of economic activity three to nine months into the future, was -3.1 per cent in January, its worst reading in almost 18 years.
Westpac senior economist Matthew Hassan said the index had been lower on only four occasions in its 49-year history - the early 1960s, mid-70s, early 80s and early 90s.
'Each of these was followed by recessions in the Australian economy,' Hassan said.
He said deep interest rate cuts since September and stimulus measures worth more than $50 billion should help cushion the Australian economy from a recession as intense as the 1990s.
'Both monetary and fiscal policy has been eased aggressively and early,' he said.
'At the same time, Australia is not having to deal with the same sort of problems that badly undermined the banking system in the early 1990s - the sharply unwinding boom in commercial property in particular.'
Australia recorded its first quarter of negative growth in eight years in the final three months of 2008.
Most economists predict a similar result in the current quarter, which would officially put Australia in recession, usually defined as two successive quarters of negative growth. -- AFP