IMF downgrades Aussie outlook

Via ABC:

Weaker mining exports and housing investment hurt by bad weather earlier this year have prompted the International Monetary Fund to cut its growth forecasts for the Australian economy.

In what appears to be a blip, the IMF’s latest World Economic Outlook released overnight has sharply revised Australian growth down to 2.2 percent in 2017 from projected of 3 percent just six months ago.

While Australia’s economy is expected to recover in 2018, the forecast has also been softened to 2.9 percent down from an anticipated 3 percent.

“Growth is expected to soften temporarily to 2.2 percent in Australia, where housing investment and mining exports in the first half of the year were undermined by bad weather,” the IMF says.

Treasurer Scott Morrison, in Washington for the IMF’s annual meetings, said he remains committed to the government’s own budget forecasts but will take the IMF’s outlook into account.

“We’ll obviously revise or review that as necessary as we go into the mid-year economic statement. That’s the time to do that,” Mr Morrison said.

While not rejecting the IMF’s revision, Mr Morrison pointed to “encouraging” economic data including the latest business survey from the NAB which described business conditions as rock solid.

“So the better days I spoke about in the budget is being borne out by this data and let’s not forget 325,000 Australians getting a job last year,” Mr Morrison said.

The IMF has cited the impact from Cyclone Debbie in March as a factor where delays in coal transportation triggered a decline in the coal price index which has since recovered by 16.5 percent.

The report says strong demand from China assisted in the price recovery in addition to labour dispute at Australian mines restricting supply.

The IMF has urged Australia to use low interest rates to deal with an “infrastructure deficit” alongside Canada, Germany, the United Kingdom and the United States.

It urges greater attention to upgrading surface transportation and improving technologies such as high speed rail, ports, telecommunication, broadband and 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,” the IMF says.

“Many countries could take advantage of the favourable funding environment to improve the quality of the existing infrastructure stock and implement new projects.”

The IMF also raises concerns about stalling reforms to productivity and work practices once again singling out Australia in addition to Greece, Italy, Japan and Spain.

“Persistently sluggish productivity in some countries has led to greater emphasis on product and labor market reforms,” the IMF says.

“These reforms have been found to raise productivity and employment and to improve resilience to shocks.”

The IMF’s slight revision comes after 26 years of continuous economic growth in Australia where fallout from the global economic crisis was largely avoided because of the mining investment boom and government support to banks.

Cautious confidence about the global economy is based on the IMF forecasts for pickups in investment, trade and industrial production after a long period of slow growth and low inflation.

Further downgrades ahead.

Comments

  1. This is no innocent false return on the screen. Probably the most fateful mis- interpretation of a blip on the radar would have been the radar operators at Pearl Harbour who mistook the blip on their radars to be incoming US aircraft rather than the Japanese, about to wipe em out.
    This is the real thing.
    Mantra just sold their resorts, no quibble.
    Every honest report shoes a massive slowing in consumer spending, and the weather, well AI says this xmas will be the worst since 1985.
    Time to batten the hatches, and the afr says the govt cant afford pensions.
    More dots to join

    • People are very fickle… atleast in Sydney, if the weather is good people like to enjoy the weather rather than go to auction which is really absurd… if the weather is cold and raining, people tend to stay indoors especially in shopping malls because using heating at home is for losers, again auction miss out, which is again a travesty… if the weather is really warm people again go to shopping malls because using AC at home is for losers, again auction miss out, which is again a travesty..
      Sydney people have suddenly become a lot more weirder, how on earth can anyone of the above experiences beat the experience of signing 2million loan while outbidding others in auction drinking a free coffee from the domain cart!!

  2. While not rejecting the IMF’s revision, Mr Morrison pointed to “encouraging” economic data including the latest business survey from the NAB which described business conditions as rock solid.

    Well I for 1 am glad to see that’s the case and have full faith in our leaders to deliver us from the threat of a recession. 😀

  3. slightly off topic, but…
    http://www.abc.net.au/news/2017-10-12/private-health-insurance-shake-up-targets-youth-mental-health/9042448

    This smells a bit like the various first home buyers grants wheeled out over the years to prop up an industry dominated by our dear old boomer delegation…

    Gov’t dangling a rather pathetic carrot to young people to help pay for the nation’s looming boomer hospital bill ?

    Any young people reading this: First invest in the key services that the aging boomer demographic will be tripping over themselves to access in coming years; quality health care companies (think aged care providers, nursing homes, private hospital operators etc), then secondly, put the proceeds towards your private health cover if it buys you a tax discount.
    And if you are fit an healthy buy the bare minimum cover that gets you policy discount and avoid tax surcharges. (the public health system here is excellent by global standards)

  4. Aged care won’t exist in its current form in years to come. It is simply unsustainable, too costly, and too many facilities have been built to cater for this mass cohort of ageing boomers. My wife and I have already pledged we would rather request voluntary assisted dying over aged care. That way, whatever measles super we have accumulated, our poor kids can have and we don’t eat into it much. We can’t afford a house to biy, so that won’t be passed down, so next best thing is to kill ourselves off early to give our kids something.