Wayne Swan Says Global Slowdown Affecting Australian Economy
Australia’s economy, buoyed by demand from China for iron ore and coal, is feeling the impact of a global slowdown as employers defer hiring new workers on European uncertainty, Treasurer Wayne Swan said.
While Australia can still expect “solid growth,” the global environment and gains in the nation’s currency will affect non-mining sectors such as manufacturing, Swan said yesterday in his e-mailed weekly economic note.
Australia’s central bank lowered its 2012 forecast for growth on Feb. 10, three days after keeping interest rates unchanged following consecutive reductions of 25 basis points each in November and December. Toyota Motor Corp. (7203) and General Motors Co. have cut jobs in Australia this year, citing the currency’s strength, while Alcoa Inc. (AA) is reviewing the future of an aluminum smelter.
“We shouldn’t pretend that there’s a simple solution,” Swan said. “The affected businesses will need to do more to adapt, to improve their efficiency, to spot new opportunities, to find new markets, and to design new products.”
Australia’s dollar has climbed 6.4 percent versus its U.S. counterpart in the past 12 months, matching gains in the yen and lagging behind only the New Zealand dollar among Group of 10 currencies.
The Reserve Bank of Australia sees average growth of 3.5 percent in 2012, down from its Nov. 4 estimate of 4 percent. Consumer prices will rise 3 percent in the year through to the fourth quarter, less than a previous prediction of 3.25 percent, the central bank said Feb. 10.
The revision to economic growth, amid stalling consumer spending and weaker property markets, would still put this year’s growth higher than the 3 percent average in the decade through Sept. 30.
Australian’s benchmark interest rate of 4.25 percent gives it the highest borrowing costs among major developed nations. Policy rates in Japan and the U.S. are near zero, while the European Central Bank has its benchmark at 1 percent.
The government doesn’t expect flooding in the eastern states of Queensland and New South Wales to have a significant impact on the economy as key coal mining areas such as the Hunter Valley and Bowen Basin escaped major disruption, Swan said.
Thousands of people were stranded last week as towns were cut off when floodwaters surged through the nation’s eastern river systems, threatening cotton crops in the world’s third- largest shipper of the fiber.
Flooding may have caused A$50 million ($53 million) of damage, the federal government said last week. Natural disasters last year cost the Australian economy A$9 billion, according to the government.
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