AAP General News (Australia)
12-30-2001
Fed: No World Cup berth, but economy going gangbusters - govt
By Jim Hanna, Economics Correspondent
CANBERRA, AAP - We missed out on a World Cup soccer berth, lost the Davis Cup final
to France, and narrowly avoided a humiliating Test series defeat at the hands of
New Zealand.
But forget all that because Australia beat the big guns in the economic stakes this
year, according to Treasurer Peter Costello.
"The Australian growth rate is significantly higher than any of the G7 countries,"
he told reporters after Australia's GDP growth was officially measured at 1.1 per cent
for the three months to September 30, 2001.
"In fact over the course of 2001, calender 2001, the Australian growth rate has been
about five times the average of the G7."
Perhaps, but the trouble with Mr Costello's flag-waving is that the G7 countries are
major world economic powers - we're not.
Their economic misfortunes have a severe impact on their region and, in the case of
the United States, the world.
Try as we might, we just don't have quite the same clout on the world stage.
Comparing us with the G7 is as ridiculous as comparing our growth rate with that of
China, Russia or Egypt - all of which are growing faster than Australia.
When the G7 economies are sick, we shouldn't be gloating - we should be worrying.
But, as Mr Costello rightly said, the real story is the Australian economy is growing
strongly despite the global downturn.
This is largely because the government spent hundreds of millions of dollars lifting
the building industry out of its GST-induced plunge and the Reserve Bank slashed interest
rates six times to 30 year lows.
For that reason, consumer spending kept growing in Australia while it slowed elsewhere.
Job growth and business investment, however, remain dark clouds on our horizon next year.
But many experts believe Australia's prospects in 2002 are actually much better than
Mr Costello's grim warnings suggest.
The Australian economy has grown strongly this calendar year, racking up 2.9 per cent
growth in the three quarters completed so far (fourth quarter GDP will be known next March).
While those three quarters only included the first weeks of the September 11 impact,
most indicators (like stock markets and consumer sentiment surveys) are back to where
they were before the attacks.
However, the attacks, and the anthrax scares that followed, belted US consumer confidence,
devastated its airline industry and may prolong a recession deemed to have begun in March.
That will reduce the US appetite for Asian-made IT goods and other modern gadgets.
With fewer US dollars coming in, Asian economies will have less to spend on Australian
goods and services, although our low dollar has kept them affordable so far.
Mr Costello warned the global downturn would hurt Australia next year, when it will
be felt initially by exporters, especially those selling manufactured goods and services.
"If the US comes back, we might defy again what has happened in the world," he said.
US officials, however, say they do not expect the recovery there to begin before mid-2002.
In the meantime, economists expect the housing boom to keep the Australian economy
afloat until the middle of next year.
They also expect the Reserve Bank to cut rates again early in 2002 to ward off the
global slowdown if, as feared, the US economy is still bogged down in recession.
AAP jph/daw/mg/br
KEYWORD: YEARENDER ECONOMY YEARENDER
2001 AAP Information Services Pty Limited (AAP) or its Licensors.
