Fed: IMF slashes Aust growth forecast to 1.9 pct from 3.25 pct

AAP General News (Australia)
04-27-2001
Fed: IMF slashes Aust growth forecast to 1.9 pct from 3.25 pct

(EMBARGOED UNTIL 0100 AEST FRIDAY, APRIL 27)



By Jim Hanna, Economics Correspondent

CANBERRA, April 27 AAP - The International Monetary Fund (IMF) has slashed its 2001
forecast for economic growth in Australia to 1.9 per cent, from the 3.25 per cent it predicted
just a month ago.

The IMF expressed serious concerns about the pace of slowdowns in other parts of the
world which would impinge on Australia's prospects as a major exporter.

In its latest World Economic Outlook, the IMF said global growth in 2001 would be weaker
than previously indicated, dipping to 3.2 per cent this year before kicking up to 3.9
per cent next year.

The forecast was issued ahead of the IMF Spring Meetings in Washington, which will
be attended by Treasurer Peter Costello.

Contributing to the weaker outlook is a greater than expected slowdown in the United
States, weaker but still solid growth in Europe, a deterioration in the outlook for Japan
and slower growth in other East Asian countries.

"Against the backdrop of a weaker external environment and the temporary weakness in
the domestic housing sector, the IMF has forecast economic growth in Australia of 1.9
per cent in 2001," Mr Costello said.

But the IMF expects Australia's growth to rebound to 3.5 per cent in 2002, with unemployment
tipped to fall and inflation to stay low, he said.

"In 2002, the IMF expects consumer prices (inflation) to increase by 2.4 per cent ...

[and] Australia's current account deficit is also expected to decline over 2001 and 2002,"

Mr Costello said.

But the Opposition attacked Mr Costello, saying the IMF forecast demanded that he explain
why Australia's prospects have soured so quickly.

"This looks like a dramatic reassessment by the IMF of Australia's economic prospects,"

Labor's treasury spokesman Simon Crean told AAP.

"The Treasurer should do more than issue glib, self-congratulatory press releases.

"Clearly, he has some serious explaining to do."

The government received more bad news on the jobs front, with a key indicator showing
skilled vacancies were 23.5 per cent lower today than they were 12 months ago.

Meanwhile, Prime Minister John Howard dismissed business and economists calls to allow
the Budget to go into deficit to boost the economy.

"I am not attracted to that and in any event the economy is getting quite a bit of
stimulus already with interest rate cuts," Mr Howard told ABC radio.

"We've had $12 billion of personal income tax cuts (and) we are getting further stimulus
on July 1 when, under the tax package, the financial institutions duty (FID) will be abolished.

"Company tax is scheduled to fall from 34 cents in the dollar to 30 cents in the dollar."

Weaker-than-expected economic growth is likely to reduce tax collections, thus lowering
government revenue.

Mr Howard said he believed in a balanced budget, rather than a large surplus.

One economist said a deficit of up to $1.5 billion would be acceptable, while business
groups called for short-term, targeted spending to help businesses meet the cost of implementing
the GST.

AAP jph/kjp/hu/mo

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