[zaph]

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Australia needs to be ready with an economic stimulus program the moment Europe "blows", a leading economist says.

Deloitte Access Economics director Chris Richardson uses this morning's quarterly Business Outlook to implore political leaders not to let ''talkback radio swamp smart policy'' should Europe take a turn for the worse.

''Australia's fiscal stimulus last time was a striking success,'' he writes. ''It simply wasn't seen as that in the court of public opinion. That gap between reality and perception threatens a poor reaction by the punters if a new stimulus is needed in 2012.''



While the $15,000 first home owner grant was effective, Mr Richardson would be cautious about offering it again.

''First home owner programs are the crack cocaine of fiscal stimulus. They usually work a treat. But they make young couples spend too much on their first home, making their lives miserable down the track.''


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i don't think there's the political will for a large stimulus again. public opinion is largely that the stimulus was a waste of money and that the budget must return to surplus.

[zaph]

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The latest quarterly Business Outlook by Deloitte Access Economics forecasts that Europe will be the key to growth globally and locally this year.

The report, titled "Eurogeddon", warns that 2012 could easily bring a deep recession and widespread bank failures in Europe.

Deloitte Access Economics director Chris Richardson says there is a 50-50 chance that Europe will muddle through the crisis.

"If it doesn't then yes, Australia has something like a rerun of the global financial crisis - unemployment up, profits down, Government budget hit for six," Mr Richardson said.

"Probably not a recession; a technical recession, thanks to magnificent momentum in mining, but a tough time nonetheless."

Mr Richardson says the European Central Bank is containing the situation by pumping money to the banks in the form of discount loans.

"The money that Europe's central bank is pumping out is working very effectively as sticky tape," Mr Richardson said.

"It is going to the banks, but the banks in turn are passing indirectly some of it back to governments and that combination is holding Europe together."

But even if the sticky tape does hold, Deloitte still expects Europe's problems to weigh on parts of the Australian economy.

http://www.abc.net.a...ogeddon/3787616