But we are not just influenced by what happens within our economy; the influence of the slumping US, China, Japanese and South Korean economies will have a dramatic impact on our growth as the year goes on.
Only China still seems to be holding out (and that seems to be encouraging global investors: see below).
It is now becoming clear that the 3.8% contraction in the US economy in the 4th quarter of 2008 will be upgraded to closer to 5% after more figures have emerged since the first estimate three weeks ago.
And it also seems increasingly likely that the US economy will suffer another sharp slump this quarter, which will increase the risk that our slump will be larger than expected.
The falling level of demand in the US is having a knock-on impact in the exports giants of Asia: from Japan, to China, Taiwan, Hong Kong and Singapore. That will in turn have an impact on Australian exports.
US industrial production was down 2% in January from December and was down 10% on the same month in 2008 (and falling at an annual rate of 21% over the past four months!).
Car production fell a huge 23.5% in January as car companies closed factories, idled lines and sent workers on leave or sacked them. And that couldn’t keep up with the 37% slump in sales.
Every category of production fell in January and compared with January 2008 (Source,US Federal Reserve).
That’s bad news for every major economy because it means there is no bottom in sight in the US.
Another manufacturing survey on the US East Coast overnight had more glum news with another fall in activity, but the US Index of Leading Indicators was up in January, feebly so, for the second monthly rise in a row.
Is that pointing at a mid-year mirage of a bounce?
In a worrying move, the huge Goodyear Tire Company has revealed its second round of massive job cuts in six months: 5,000 after 4,000 were slashed in the closing months of 2008.
Goodyear is one of a number of US car parts companies to have asked the government for more than $US25 billion in assistance earlier this week, before General Motors and Chrysler put their hands up for another $US21.6 billion.
When companies like Goodyear make a second attack on employment levels and costs you know they are hurting and the outlook is darkening by the day. As it is in the auto industry in America.
Nearly five million US workers are now on first time job benefits.
The fall in new US home starts in January was the 7th in a row. They were down 16.8% from December, which was off 15% from November, and fell the same amount from October.
Overall, new home starts are around 56% down on where they were in January 2008.
And it was only last August-September that some analysts were saying the housing sector was bottoming out, as they did again today with news that new building permits (which allow starts to happen in later months), fell by less than 5% last month from December.
In fact the number of new permits (521,000 annual) was larger than the number of actual starts, (466,000) which got some analysts screaming "housing is bottoming out", again.
New home starts were 466,000 in January, new home sales were 331,000 in December (when starts were above 500,000), so the backlog of more than a year’s unsold new homes is not going to allow a bottoming out for some months, at a minimum.
Industrial production in Japan, Taiwan, South Korea and across Europe is plunging. Russia’s fell by 20% last month.
All that feeds back into our external account, not the domestic economy.
Imports fell last month, a sign of the faltering impact of the slowdown. Exports are out the week after next for January and will show that the contracting trade surplus disappeared.
That crash in global industrial production is something Goldman Sachs JBWere have just finished studying. It’s the biggest and most uniform collapse in production seen, according to Goldman Sachs research.
They reckon we are not prepared for it, nor are their forecasts for exports.
If exports fall by more than expected, then there’s a very good chance the slump in the Australian economy will be much deeper and last longer.
"Our G7 estimate for December is for a 10.8% year on year (yoy) decline.
"Indeed, when we look at the major regions across the world the decline is remarkably uniform.
"We estimate that Latin America, Western Europe and Eastern Europe are set to post around 11% yoy declines in industrial production while North America will decline 7.2% yoy and East Asia (including China) is set to decline 5.2% yoy.
"Although East Asia appears to have been more resilient, excluding China industrial production in East Asia has fallen by a remarkable 13.9% yoy – double the depth of decline recorded during the Asian Crisis.
"Regardless of how you cut the data, we are currently right in the midst of the biggest decline industrial demand on record."
The firm asked, with that in mind, what are the implications for Australia? Have we captured the shock in our forecasts?
"The short answer to this question is probably not. Our forecasts will be met only on the condition that evidence of improvement in the global industrial cycle accumulates in the relatively near term.
"Our forecast for a decline in Australia’s exports is at the bottom of consensus as surveyed by Consensus Economics in February.
