You want resiliency? Forget the U.S. Look to Australia, which posted the strongest growth of the major world economies in 2001. The country should be a growth leader in 2002, also.

In 2001's fourth quarter, real gross domestic product grew at a startling 5.2% annual rate. Unlike most other economies, Australia's real GDP actually accelerated in each quarter of 2001 (chart).

Yearend growth was boosted by a 25.4% jump in homebuilding, thanks to a government subsidy of 14,000 Australian dollars (U.S. $7,350) for first-time buyers. Business investment and consumer spending also increased.

Slower inventory growth cut into GDP, but the most serious weakness came from net exports. Strong domestic demand brought in more imports, while the sagging global economy meant that exports fell. The trade sector subtracted 0.7% from growth last quarter.

Even so, Australia has weathered the global downturn even as major trading partners such as Japan, Southeast Asia, and the U.S. fell into recession. The economy benefited from a weak Australian dollar and from stimulative economic policies. In addition to the housing program, the government cut taxes, and the Reserve Bank of Australia trimmed interest rates by two percentage points six times in 2001. While some fiscal policies were politically motivated in an election year, the judiciously timed stimulus did help the country avoid recession.

For 2002, Australia's economy is expected to grow about 3%, on par with forecasts for the U.S. but above those for Europe and Asia. January data were encouraging. Retail sales were strong, and payrolls rose by 64,000. The jobless rate stayed at 7%, and the trade deficit narrowed thanks to higher commodity prices.

Australia can count on accommodative monetary policy and better exports to boost growth. Yearly consumer inflation stood at only 3.1% in the fourth quarter, so the RBA won't rush to raise rates to fight inflation. And the global recovery will mean a rebound in Aussie exports this year.

By James C. Cooper & Kathleen Madigan

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