SYDNEY- Analysts have downgraded forecasts for Australia’s economic growth this year as the worst bushfires on record undercut already shaky consumer confidence, adding another burden on consumption and offsetting lower interest rates.
Economists polled by Reuters forecast Australia’s A$2 trillion ($1.4 trillion) of annual gross domestic product (GDP) would expand 1.8 percent in 2019, down from predictions of 1.9 percent in the previous poll and 2.7 percent early last year.
Growth was seen picking up modestly to only 2.3 percent this year, again down from 2.5 percent in the previous poll. The outlook for 2021 held at 2.5 percent, still short of the 2.75 percent that is considered trend.
The economy was already running at a pedestrian 1.7 percent pace in the year to September, and that was before massive bushfires began ravaging much of the east and south of the country.
“The negative impact of bushfires is more enduring than other disasters like floods,” said Michael Blythe, chief economist at CBA. “The impact is accentuated by the extreme drought conditions weighing on much of the landscape and particularly the agricultural sector.
“Business disruption will see some activities delayed/deferred with a flow-on to sentiment, particularly in regional areas and the tourism industry.”
Consumers were already in a miserly mood amid years of sub-par wage growth and record high debt levels, and signs are they curtailed spending even further over Christmas. – Reuters