Economic report praises resources sector
Deloitte has published its Asia Pacific Economic Outlook report, which found that Australia’s economic recovery is slower than anticipated.
The report finds that slowed economic recovery is likely to push the anticipated GDP growth in 2011 down to 3.25 per cent.
However, the report also concludes that the cooling off of growth is likely to push the economic benefits of the country’s reconstruction efforts into the next year.
“The silver lining in this delayed recovery is the continued demand for Australia’s commodities from some Asian economies that continue to grow above trend. This is manifested in the favorable terms of trade reaching record levels in June 2011, driven mainly by an increase in the contract prices of iron ore and coal,” the report states.
The report warns that the country’s terms of trade are likely to dampen as supply chains resume full capacity after repairs are completed in Queensland.
Uncertain macro-economic conditions in the United States and the Eurozone, as well as anti-inflationary policies in India and China, will contribute to a slight fall in trade volumes and contribute to a contraction in export growth.
Despite a possible downturn in exports, the report states that the mining sector is likely to expand its stake in the GDP from 4 per cent to 6 per cent.
The report also found that decreased retail spending and a downturn in the construction sector had led to a contraction in non-mining sector growth expectations. A declining consumer confidence and contractions in non-essential spending has contributed to an overall weak growth.
Inflation beyond the RBA’s target band of 2-3 per cent had contributed to overall uncertainty, with the report forecasting continued inflation rates above 3 per cent in the next quarter.
Deloitte found that despite the bleak global outlook, the country is well paced with low levels of unemployment and strong mining output.
However, the report warns that an increasingly strong dollar, coupled with inflationary pressures, could weigh down manufacturing and export sectors.
“A lot depends on growth in Asia, in particular China and India, which could boost commodity exports and prop up Australia’s GDP growth.”
The report can be found here