Australia revises its outlook downward
Australia's prime minister, treasurer, industry leaders, and academics agree: The immediate outlook for their nation's economy is poor.Skip to next paragraph
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This view is reflected in declining prices on the stock exchange, in near-record unemployment, and in a steady decline in the value of the Australian dollar.
To make matters worse, Australia's two largest industrial states face electric-power shortages during the coming winter, and these could severely restrict industrial output and reduce spending and investment.
This week federal Treasurer John Howard said the government was facing one of its more difficult tasks of economic management since taking office at the end of 1975.
''There is simply no alternative at present to a degree of discomfort and a degree of economic adversity,'' he told Federal Parliament last week.
Prime Minister Malcolm Fraser puts the blame for the poor outlook mainly on international developments, though he is strongly critical also of wage-rate increases within Australia.
In a ''state of the nation'' address to Parliament several weeks ago, the prime minister urged Australians to lower their expectations in anticipation of a difficult domestic and international economic climate.
International events, he said, affected Australia profoundly. He added: ''We cannot but be affected by factors such as the high cost of funds, nor can we avoid being affected by the protectionism which strikes at many of our exports, especially our farm products. And it is important for us to be aware of the very real dangers that are created by increasing protectionism in other countries during a time of world recession,'' he said.
Mr. Fraser warned that in light of stagflation overseas, the government would be committed to pursuing its domestic policy objectives ''far more slowly than we would wish'' because it would have to concentrate on seeking economic growth.
He said it was significant that Australia had grown at twice the rate of the average of the Organization for Economic Cooperation and Development in the past two years and that the OECD had predicted a 3 percent growth for Australia in 1982 against an OECD average of 1 percent.
However, one of Australia's major banks this week doubted the validity now of the OECD forecast on Australia's growth for 1982. The ANZ Bank in its monthly ''Business indicators'' report, said: ''It is now apparent that Australia will not readily attain economic growth above the OECD average in the early 1980s on the basis of rapid resource development and export buoyance.''
It said also there was a growing problem with Australia's inflation rate -- now over 11 percent -- and that on current trends Australia appeared in danger of having an inflation rate well above the OECD average by the end of 1982.
An official survey by the Confederation of Australian Industry and another major bank published this week suggested that the economy has turned down already.
The survey said manufacturers were more pessimistic about the general outlook for six months ahead than they had been at any time since 1974. Manufacturers reported that new orders, output, and employment fell during the latest three months and they forecast further reductions in the June quarter.
The worsening in the employment situation was reflected in the official figures for February. They showed that almost half a million people were looking for work, the highest total since World War II. This represented an unemployment rate of 7 percent, a jump of half of 1 percent in a month. Until January unemployment had remained fairly constant, on a seasonally adjusted basis, for about three years.
The deterioration in Australia's economic position is being blamed largely on the recent fall in the price of oil. This has damaged the prospects for an energy-related boom that the government expected in the early 1980s.
As a result, the oil and gas stock price index has fallen about 40 percent so far this year. Industrial stocks have fallen by about a quarter.
R. Raynor, managing director of one of the largest aluminum producers in Australia, Comalco Ltd., said last week that the comparative advantage enjoyed by Australia's energy resources was dwindling fast.
He also charged the government with adopting policies that discouraged large-scale investment in Australia.
He said the euphoric picture of the economic potential for Australia's resource-oriented developments has caused the community to lose sight of a need to ensure that these projects are internationally competitive.
Prof. Brian Johns, director of the government Bureau of Industry Economics, says the short-term outlook for Australia is relatively unfavorable, but there were grounds for optimism on the country's long-term prospects.
''Australia's resources boom has not yet run its course (and) is likely to prove the principal source of investment growth, through to the mid-1980s at least,'' he said.