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Thu, Jul 15, 2010 - Page 10 News List

Australia slashes growth forecast

AFP , SYDNEY

Australia yesterday slashed its annual growth forecast to 3 percent due to global economic volatility, but said the economy was well placed to ride out further shocks.

New estimates reduced 2010-2011 growth from the 3.25 percent predicted in the May budget, but said the economy would increase by 3.75 percent in 2011-2012, with unemployment dropping to 4.75 percent.

“Since the 2010-2011 budget, uncertainty around the global economic recovery has increased,” a government statement said. “Despite this increased uncertainty and renewed volatility in global financial markets, the outlook for the domestic economy remains positive.”

Sydney’s stock market shrugged off the downward growth revision, closing up 1.87 percent on greater optimism around the region after gains on Wall Street.

Treasurer Wayne Swan, whose massive A$70 billion (US$60 billion) stimulus package helped keep the economy afloat, said Australia remained the envy of the developed world.

Unemployment is now expected to drop from 5.1 percent at present to 4.75 percent in 2011-2012, while the budget remains on track to return to surplus within three years.

“Our economy continues to be stronger and our unemployment lower than in most other advanced economies,” Swan told reporters in Canberra.

“This is a remarkable achievement when you consider that economies in Europe and the United States are grappling with double-digit unemployment,” he said.

However, he admitted that Australia was facing an uneven recovery with many sectors struggling to keep pace with the runaway mining industry, which is riding a boom in Asian demand.

“We understand that particularly in parts of retail at the moment, that a lot of them are doing it tough,” Swan said. “The stimulus has basically faded ... and that is felt out there. That is why we need to move forward.”

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