What a contrast.
The federal government plans to carve billions of dollars from spending in next week’s mid year review to achieve a budget surplus in 2012-13 financial year.
But as it prepares to cut, the rest of the world is slowing amid growing signs of a credit freeze that is spreading to Germany, the key economy in the survival of the eurozone and the euro.
This week it has become very clear that things around the world have taken a turn for the worse, except in Australia.
Europe is tumbling towards recession nd credit freeze, while China is slowing, with rising levels of worker unhappiness and strikes.
Germany now seems to be joining other eurozone countries in finding it harder to raise money from the markets and growth in the US economy has been chopped back, even though the signs there are more upbeat than in just about any other major economy.
The most worrying development was the failure of Germany to sell all of a 6 billion euro auction of 10 year bonds this week.
It attracted bids for just over half of that from the market, forcing the Bundesbank (the German central bank) to take up the 39% of the offering that was unsold.
That shocked markets across Europe and the US and sent shares lower, as well as commodities like gold, oil and copper.
Some in the markets attempted to explain the failure away in terms of technicalities, such as an unattractive bond maturity.
But the hard heads said that Germany had now joined the rest of the eurozone in finding it tougher (or impossible in the case of Greece, Ireland etc) to rise money from the markets.
The European debt crisis escalated after a failed German government-bond auction indicated that investors are now demanding higher risk compensation even at the heart of the currency bloc’s debt market, according to a quote in the London Telegraph from Robert Brusca, chief economist at FAO Economics.
It was the biggest bond auction failure seen in Germany since the start of the euro almost 12 years ago.
Ewald Nowotny, a European Central Bank policymaker and head of Austria’s central bank, was quoted by the Austria Press Agency as saying the German bond sale was an "alarm signal".
Yields on German 10 year bonds, the bellwether security for all of Europe, jumped a nasty 0.20% after the failure to close at 2.08%, still well under the 7% plus on Italian 10 year debt overnight, but a reminder that the most credit worthy economy in Europe is now under increasing suspicion.
Italian debt remained above 7% and Portugal’s credit rating was cut to junk by the Fitch ratings group.
Germany now joins the rest of the eurozone in facing higher yields at a time when the various economies are on the brink of recession, after growing slightly in the third quarter.
Almost unnoticed in this was the collapse of a small Spanish savings bank based in Valencia which was taken over the Bank of Spain.
The early loss was put at more than half a billion euros, but reports said the final cost will be double this or more as the bank has thousands of non-performing property loans.
The failure underlined the big continuing headache for Spain’s new conservative government: the country’s weak domestic savings banks and their billions of dud property loans and deals that will need recapitalising.
Figures out overnight Wednesday showed that industrial orders in the eurozone suffered the biggest single month fall since December 2008, when it and much of the rest of the world was slumping into recession.
New orders plunged by 6.4% in September from August, according to Eurostat, the European Union’s statistical office.
It was the biggest month-on-month fall since December 2008, when the global economy was reeling from the collapse of Lehman Brothers investment bank. Then, orders dropped by 10.2%.
Leading the way was Italy where orders fell a terrible 9.2% between August and September.
But France and Spain saw drops of 6.2% and 5.3% respectively, and Germany saw a 4.4% fall as well.
That will translate to lower output and sales in coming months, meaning a fall in the level of activity.
The eurozone purchasing managers’ indices for November, also published overnight Wednesday, indicated overall economic activity continues to contract at a significant pace for a third successive month.
The "composite" index, covering manufacturing and services, rose from 46.5 in October to 47.2. – indicating the rate of contraction has steadied for the time being under the 50 level, which divides an expansion in activity from a contraction.
And the Institute of International Finance, the global bankers group, said in their November update:
"The situation in the Euro Area has taken a serious turn for the worse in the past month.
"The economy has tipped into what we believe to be a recession, which will only serve to widen budget deficits and weaken bank asset quality further.
"Policy makers are floundering to deal with this situation, amid very challenging economic and political constraints.
"The rest of the world looks on anxiously.
"Managing the global fallout from abrupt shrinkage in European bank balance sheets will be critical if an untimely re-tightening in global credit conditions is to be
