A leading economic forecaster has warned its clients to batten down the hatches for the sharpest deceleration Australia's economy has ever experienced.
But Australia is in a better position than almost any other rich nation heading into recession, Access Economics says.
And not everyone - especially those who have no reason to fear losing their job - will be impacted adversely by the dramatic slowdown this year.
"Really big and bad news is headed our way," Access said in its Business Outlook for December 2008, released on Monday.
"Conditions are worsening very rapidly. This is not just a recession, it will be the sharpest deceleration Australia's economy has ever seen."
The forecaster is also predicting:
- Global growth in 2009 will be worse than at any time since the early 1990s, and may well be the worst in several decades;
- Australia's recent prosperity will unwind "scarily" fast on the back of a slowdown in China;
- A big fall in the rate of Australia's inflation, as petrol prices tumble and retailers and wholesalers cut margins;
- Official interest rates will be cut to 2.5 per cent;
- The $A to tumble to US56 cents in 2009;
- Unemployment to jump from its present rate of 4.5 per cent to more than seven per cent by early 2010;
- The price of an average home to fall by up to eight per cent this year.
Access Economics director Chris Richardson, who admits the outlook paints a very grim picture for the Australian economy, says China is largely to blame.
"China has gone from being a force for good for Australia's economic outlook to a force for evil," he told AAP.
Australia was fine while China's economy was strong, but was "buggered" as the emerging economy became badly wounded.
Access was confident about China's economic prospects over the long term, but not in 2009.
But a possible Chinese rebound earlier, coupled with stimulus spending by the federal government and Reserve Bank action to reduce interest rates, could mean an earlier and more robust recovery than Access predicted.
"Such a boom-bust-boom scenario is not the most likely outcome, but it is a plausible one," it said.
In the meantime, national wealth - especially from exports - and employment would suffer in the looming recession.
Its effects would not be felt by everyone though, Mr Richardson said.
"People who don't have a fear of losing their job will be better off - mortgage rates are down, and petrol prices are a fraction of what they used to be."
The pain previously was in and around petrol prices and interest rates, now it would be in and around unemployment limited to "a narrow concentration of an unfortunate number".
Most people were not yet feeling the impact of a slowing economy other than watching a falling sharemarket and listening to retailers whinge, Mr Richardson said.
Access is predicting a cautious recovery after late 2009, dependent on housing prices - forecast to soften by between five per cent to 8 per cent - and unemployment.
The news is not so good for the federal government's budget which will take a king hit from falling company tax payments, and for the nation's current account deficit which Access tips to rise from $65 billion this financial year to $100 billion in 2009-10.
It warns the Rudd government will not have sufficient money to finance its reform agenda for education, infrastructure, climate change and water management.
Down the track - "when the dust settles on today's chaos" - the prospects were relatively good for most manufacturers, farmers, tourism and housing construction.
But there would be relatively worse news for miners, engineering and commercial construction, and finance and business services.
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