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Australia warned of second shockwave

CANBERRA, Aug 17 –  Australia\’s top Treasury official on Monday said there were grounds for optimism about the economy but warned a "second shockwave" may yet derail recovery from the global downturn.

Treasury Secretary Ken Henry said that while Australia had proved resilient and avoided sliding into recession, it was too early to say the crisis had passed.

"It does appear as if the economy is behaving better than people were thinking late last year or early this year," Henry told a business function.

"We\’re not rushing to judgement on this just yet. We need to be somewhat careful in prematurely declaring the war is over."

Henry said the economy remained vulnerable to a second slump which, while not as big as the one that plunged the globe into crisis, could still curb growth.

"I have no reason to believe it\’ll be anything like the first shockwave in size and intensity — it won\’t," he said.

"But there could be a second shockwave to hit us and that too could have implications for future growth. So I think we should be a little cautious."

Henry refused to speculate on whether the economy\’s better-than-expected performance would prompt the Treasury to revise its growth and unemployment forecasts, saying he was not taking a recovery for granted.

"I think it\’s fair to say that nobody fully understands the reasons for that somewhat better economic performance, and we\’re not rushing to judgement on this matter just yet," he said

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The Treasury predicted in the May budget that the economy would contract 0.5 percent in the current financial year, then bounce back to grow 2.25 percent in 2010-11.

Unemployment, currently 5.8 percent, was forecast to peak at 8.5 percent in 2010-11. The Treasury is due to release updated forecasts in November.

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