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Last Updated: Friday, 13 October 2006, 06:08 GMT 07:08 UK
Australian PM warning on drought
Australian PM John Howard
Mr Howard still presides over a growing economy
Australian Prime Minister John Howard has said that the country's worsening drought could hit economic growth.

Mr Howard said the drought, which some experts have described as one of the worst on record in Australia, would "affect our GDP growth".

Global wheat prices surged to 10-year highs earlier this week after Australian officials warned the country's harvest could be cut in half.

However, Mr Howard called for analysts to "keep a sense of perspective."

"The country overall is still doing very well," he said.

Abandoned crops

Australian economic growth slowed to 1.9% in the second quarter, the slowest pace in three years, although economists are expecting the economy to pick up speed in the third quarter.

Person holding grain
Demand for grain is increasing, putting pressure on prices

Mr Howard said it "remained to be seen" how much effect the current drought would have on Australia's economy.

"It depends on the extent to which our booming economy in other areas can offset it," he said.

Australian Crop Forecasters on Wednesday cut wheat production estimates for 2006/7 to 11.5 million tonnes, from 25 million a year earlier.

The country's Bureau of Agricultural and Resource Economics last week cut winter crop forecasts by more than a third because of the extremely dry weather.

According to official figures, eastern Australia has had five years of below average rainfall, and more than 90% of New South Wales, which contains Sydney, is said to be suffering from drought.

Reports said that farmers have abandoned crops in South Australia, Victoria, and New South Wales.

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