4. Central Bank Cuts Australian Outlook
Central Bank Cuts Australian Outlook
Australia's central bank governor Ian Macfarlane has slashed his 2003 growth forecast to 3 percent and warned that household debt levels are "excessive". His previous forecast, made in December, was 3.75 percent for this year. He also hinted the next interest rate move could be a cut, after Reserve Bank of Australia left rates on hold earlier this week. In testimony to a parliamentary committee on Friday, Macfarlane said the weaker performance of the global economy was affecting Australia's outlook for the rest of 2003. While a strong domestic demand was pushing up imports, Australia's exports had fallen "dramatically". Commodity exporters are being hit hard by exchange rate moves, with the Australian dollar at its highest levels against the U.S. dollar since July 1999. In the midday trade Friday it is at 66.84 U.S. cents, just below its high of 67.03 earlier in the day. Macfarlane's comments add a note of caution to an economy that experts say has been outperforming other advanced economies, despite the impact of a drought on the agricultural sector. National accounts released on Wednesday by the government's statistics agency show the Australian economy grew 0.7 percent in the first quarter of the year, and 2.9 percent from a year earlier. The quarterly figure was slightly below market expectations of 0.8 percent. Earlier this week, the Reserve Bank left interest rates on hold, as expected. They have now been stable at 4.75 percent for a year, with most commentators seeing little movement for the rest of the year.
However, Macfarlane's comments Friday morning raised speculation of a change ahead. He said that despite the relatively short war in Iraq and the associated dip in oil prices, the international environment has not improved as hoped. "The changing fortunes of the U.S. dollar throw an additional complication into the mix. To date, the (Australian) domestic economy has weathered the unfavorable international environment very well. Nonetheless, growth will be further adversely affected in the period ahead if the international situation does not improve," he said.
Macfarlane stressed that he was not criticizing the United States for the fall in the dollar, saying it had shouldered more than its fair share of responsibility for getting the global economy moving again. He said that more countries needed to find domestic sources of expansion, and said there was a great deal of skepticism about how successful Japan and the euro zone would be in doing this. Macfarlane said it was now clear there had been no pick-up in global growth in the first half of 2003 and there were few signs to support a pick-up in the remainder of the year. On the Australian domestic front, he said that the biggest current risk was the rapid growth of household debt.
Questions
Choose the best explanation for the following words and phrases from the reading...
- "The Australian economy has weathered the unfavorable international environment very well" means:
- "He also hinted" means:
- A "growth forecast" means:
- "a great deal of skepticism" means:
- "A drought" means:
Are the following questions about the reading correct?
1. Interest rates have been changing rapidly in Australia over the past year.
2. The biggest current threat to the Australian economy is the weak Australian dollar.
3. Macfarlane mainly blames the United States economy for the general global economic slowdown.
4. The poor performance of other economies hasn't hurt Australia yet, but it may start to soon.
5. The latest forecast predicts more economic growth than the previous one did.