Report says weather damaged Australian growth prospects

ONE of the world’s most influential economic institutions has cut its growth forecast for the Australian economy this year, citing a weather- induced hiccup.

The International Monetary Fund says it now expects Australia’s gross domestic product to grow 2.2 per cent – a sharp reduction from its projection just six months ago of 3 per cent.

It says bad weather in the first half of the year took a toll on the twin engine rooms of the Australian economy, housing investment and mining exports.

The downgrade comes just as the rest of the developed world enjoys what the IMF says is the most broadbased economic acceleration since the global financial crisis a decade ago.

In its six- monthly World Economic Outlook report, published overnight, the fund has marginally upgraded its forecast for global economic growth this year, from 3.5 per cent to 3.6 per cent.

It says the global economy should grow 3.7 per cent next year, up from its previous projection of 3.6 per cent.

But it has trimmed its forecast for Australia.

It says the nation is among those with infrastructure deficits – particularly in transport and communication technology.

“Countries with deficits in infrastructure include Austra- lia, Canada, Germany, the United Kingdom, and the United States,” the report says.

“Priorities vary but, in most cases, include upgrading surface transportation and improving infrastructure technologies ( in high- speed rail, ports, telecommunications, broadband), as well as green investments.

“After three decades of almost continuous decline, public investment in infrastructure and the stock of public capital as a share of output are near historic lows in advanced economies.”

Australia’s growth rate is likely to “soften temporarily” to 2.2 per cent this year, partly because “housing investment and mining exports in the first half of the year were under- mined by bad weather”. It provides little more detail, but notes Cyclone Debbie – which buffeted Queensland coastal regions in late March and early April – disrupted coal transportation.

In many other countries, the outlook is rosy, the report says.

“We see an accelerating cyclic upswing boosting Europe, China, Japan, and the United States, as well as emerging Asia.”

“The current global acceleration is also notable because it is broadbased – more so than at any time since the start of this decade.”

But the Washington DCbased fund warns the global recovery is “incomplete” and governments will need to tack- le issues including wage growth and economic output.

In a separate report yesterday, HSBC Australia chief economist Paul Bloxham said the nation’s 26 years of growth uninterrupted by recession was “important and worth acknowledging”.

Mr Bloxham cautioned that the cycle of economic growth and contraction was not “dead”.

“Australia will almost certainly have a recession at some point,” he said.

“However, what is clear is that over the past 26 years, the volatility of Australia’s economy has been much lower than at any other time in the country’s history and most other countries’ experiences.” stagnant sluggish