Fed: IMF says world economic outlook rosy

AAP General News (Australia)
04-22-2004
Fed: IMF says world economic outlook rosy

(Eds: IMF report embargoed to 1500 GMT (0100 AEST) Thursday, April 22)



By Krista Hughes, Economics Correspondent

CANBERRA, April 22 AAP - The outlook for the world economy had brightened in the last
six months and was now among the rosiest in 10 years, the International Monetary Fund
(IMF) said today.

In its twice-yearly economic scorecard, the United Nations lender upgraded its forecasts
for global growth on the back of a pick-up in the United States and Asia.

In good news for Australian exports, the global economy was expected to grow 4.6 per
cent this year - from 4.0 per cent forecast in September - and 4.4 per cent next year.

The US economy was tipped to grow 4.6 per cent this year and 3.9 per cent in 2005 while
China, Australia's fastest-growing export market, would steam ahead at 8.5 per cent this
year and 8.0 per cent next.

"The outlook for the world economy is among the rosiest we have seen in a decade," the IMF said.

"In the short run, it is possible that global growth may be higher than projected,
although geopolitical risks - including terrorist attacks - and oil prices have become
increasing concerns."

Oil prices have risen from $US26.50 a barrel in September to $US34 a barrel in mid-April,
and futures markets pointed to a $US32.50 average during 2004, meaning higher petrol prices
at the bowser.

The IMF left its growth forecast for Australia unchanged at 3.5 per cent in 2004, picking
up to 3.6 per cent in 2005, but inflation was upgraded to 2.6 per cent this year and 2.5
per cent in 2005.

It repeated warnings about the impact of a possible housing market cool down, although
overall, the outlook was good.

"Household spending is being underpinned by immigration, declining unemployment rates,
buoyant housing prices, and rapid growth of consumer credit," the IMF said on Australia
and New Zealand.

"Looking forward, growth prospects are strong, especially in Australia, where productivity
growth has been robust."

But it noted low unemployment would put pressure on prices and further interest rate
rises might be needed.

The report came as figures showed Australians' private wealth rose 17 per cent in 2003,
the fastest in 14 years, to a new record high of $231,000 a head. Average debt was $18,100
a head.

CommSec chief equities analyst Craig James said the 60 per cent rise in private wealth
over the last five years had only been equalled once in Australia's history, in the late
1980s.

He also said Australians should not be afraid of higher interest rates in the US, following
upbeat comments from the US Federal Reserve boss overnight.

The Aussie dollar lost more than one US cent after Alan Greenspan said the US economy
appeared to have turned the corner, sparking a rally in the greenback.

The Fed chairman will address the Congressional Joint Economic Committee tonight.

The IMF said the US would have to raise its interest rates and cut its current account
and budget deficits to avoid global instability.

AAP kmh/sw/sco/de

KEYWORD: ECONOMY NIGHTLEAD (EMBARGOED)

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