JP Morgan's chief economist Stephen Walters writes that Australia should avoid a recession due the work of the RBA: Australia now boasts an independent, nimble central bank which, crucially, has prevented an inflation break-out, and a flexible exchange rate that acts as a pressure valve for domestic excesses. Although AUD has not fallen as much as RBA officials hoped, it has dropped materially since the terms of trade peaked, cushioning the adjustment for the economy. Still, booms in commodity prices and investment absorb spare capacity in labor and product markets, driving up costs, and inevitably require adjustment to more sustainable conditions. The worst hangovers usually follow the wildest parties, but not this time; the forecast anticipates merely another year of sub-trend growth, not recession. Australians should accept an extended period of sub-optimal growth as the modest price to be paid for the earlier euphoria.