The hit to exports from Japan’s quake and tsunami, devastating floods in its own northeast and a rallying dollar has shaved 1 percentage point off Australia’s growth forecasts, a report said yesterday.
Accompanied by a slump in consumer spending, the disasters have led the Australian Treasury to downgrade growth from the 3.25 percent flagged in November’s budget update to 2.25 percent, the Age newspaper reported, citing an internal memo.
The devastation and nuclear crisis in key trading partner Japan wiped 0.25 percentage points from economic growth, according to the memo, with Australia’s summer of floods and cyclones delivering a 0.5 percentae point hit.
Australia’s currency, which has experienced a record-breaking run above parity with the greenback in recent weeks, was also stronger than had been anticipated, impacting exporters and import-competing industries.
“With already patchy growth in some sectors, the impact could lead to flat or even negative growth in the March quarter, although there is likely to be a rebound in the June quarter,” the memo said.
The 1 percentage point growth downgrade translated to A$13 billion (US$13.7 billion) in damage, the Age said, increasing pressure on Australian Treasurer Wayne Swan to deliver deep spending cuts in next month’s national budget.
Swan has already flagged an austere and potentially unpopular budget due to the floods, Australia’s costliest natural disaster, with reduced revenues but growing costs.
“These are impacts in the short term and there’s no doubt there will be an impact on the budget bottom line this year,” the ABC reported Swan as saying yesterday. “But as we go into the forward estimates, as we go into the years ahead, growth will be strong. Short-term weakness, medium-term strength.”
Separately, Japan is considering issuing special bonds to fund reconstruction following last month’s massive earthquake and tsunami, and imposing a new tax to repay the debt, a report said yesterday.
The new bonds would be used to finance the rebuilding of infrastructure, creating jobs and supporting local businesses, the Nikkei newspaper reported without citing sources.
The new debt could be repaid though an increase in either income or consumption tax, the report said.
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