Australia's downturn story is playing out differently than in other countries. While consumer sales have plunged dramatically in other regions, companies selling consumer goods in Australia have not felt the pain as quickly or severely. Business confidence surged in July to an almost two-year high, and the month before consumer confidence surged almost 13%, a 22-year record. Unemployment held steady at 5.8% in July and has risen by less than many economists had expected. Indeed, the Australian economy is one of the few advanced economies that did not fall into a recession.

If, as now appears likely, Australia does manage to stave off a U.S.-style downturn, the credit goes to calmer financial markets, low interest rates and fuel prices, and hefty government-stimulus spending that spurred retail sales. Demand from China has also helped Australia's commodity-based exports stay relatively strong.

Despite the rosy economic news, though, forecasters warn that Australia is not out of the woods. With economists expecting the Reserve Bank of Australia, which has held rates steady for the past four months, to begin leaning toward monetary tightening, unemployment among full-time workers could rise amid deterioration in the housing market. As government-stimulus cash payments dry up, consumers might tighten up on spending again, especially on nonessentials like luxury goods and durables, entertainment, home improvements, and travel. Historically, private-label penetration in Australia has been lower than other markets like the U.S. and Britain; for example, only 51% of milk is private brand in Australia, vs. 63% in the U.S. and 74% in Britain.

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