Australia's economic miracle?

The Australian economy seems to be riding out the global storm

The buoyancy of Australia's economy is already looking out of step with the gloom and doom of both the rest of Asia and the world at large.

And on top of surging consumer and business confidence, new research from one of the country's main forecasting houses suggests Australia's growth could easily outstrip that of its main competitors in the year ahead.

According to Access Economics, gross domestic product could hit 3.7% for 2002, up from 2.3% last year, as a booming housing sector, helped by interest rates at 30-year lows, and a conveniently weak Australian dollar underpin a revival.

"Australia may yet resurrect the title of miracle economy," the forecaster said.

"It will easily outpace the world, riding a housing rocket, record low interest rates, federal spending largesse and a need to rebuild inventories."

Rocky road

That is not to say the way ahead is entirely clear of obstacles, the group said.

"There is a risk a robust US recovery is delayed until early 2003," Access director Chris Richardson said in a statement.

Despite rock-bottom interest rates of 4.25%, home loans are slightly below the storming pace they have set generally in 2001, falling 0.3% month on month after a rise of 17% or more in the year till then.

And late in 2002, exports could come under pressure, while unemployment is on the up, with 8,500 jobs lost in December and the jobless rate set to rise to 7.25% by midyear from 6.7% now.

But inflation looks likely to remain subdued so long as the Australian dollar's weakness persists after a year in which it fell nearly 9% against the US dollar, the research body said.

At 2.3%, Access's inflation forecast is little more than half the 4.3% forecast for 2001.