03-09-2015, 11:57 PM
China fuels IMF fears for growth
David Uren
[Image: david_uren.png]
Economics Editor
Canberra
[Image: 875281-c56ebb20-5234-11e5-af2f-e6e8604c3982.jpg]
Retail trade. Source: TheAustralian
[b]China is emerging as one of the biggest risks to the global economy, with the International Monetary Fund calling on G20 finance leaders meeting this weekend to help avoid a new worldwide downturn by doing more to lift productivity and stimulate demand.[/b]
The fund is preparing to slash growth forecasts for the global economy, with this year shaping up as the weakest since the 2008-09 global financial crisis. The downgrade comes just two months after the fund last cut its estimates.
While “emerging” countries such as China, Brazil and Russia helped pull the world out of the crisis, their easy money and budget stimulus policies were threatening to pull the global economy down. The extent of the downgrade will be made public next month, but the IMF is expected to cut its estimate for global growth this year from 3.3 per cent to 3.1 per cent, with emerging country growth possibly dropping below 4 per cent.
In a report prepared for G20 finance ministers and central bank governors meeting in Turkey tomorrow, the fund says that if any of the risks confronting the global economy were realised, “it would imply a much weaker outlook” than this downgrade.
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The IMF says world trade, on which the growth of these countries has relied, is now falling. They are also having to cope with lower commodity prices, high company debts and the potential for disruption once the US starts raising interest rates.
[Image: 896235-03f1608c-5235-11e5-af2f-e6e8604c3982.jpg]
Director of the IMF Christine Lagarde.
“Global growth remains moderate, reflecting a further slowdown in emerging economies and a weak recovery in advanced economies,” the fund says. “Productivity growth in both advanced and emerging countries continues to be low.”
The fund says G20 governments and their central banks should be doing more to boost demand. Governments with the budget scope to lift spending in areas such as infrastructure should be doing so, while central banks should keep rates low.
The Abbott government’s effort to lift demand with tax cuts for small business appears to have produced only a short-term increase in spending. Retail figures released yesterday show sales fell 0.1 per cent in July, the first dip in spending since May last year.
Stores selling office equipment, electrical and household goods had the biggest fall. Sales of electrical goods were down 3.3 per cent and are back to pre-budget levels.
Citigroup economists Josh Williamson and Paul Brennan said: “We were never optimistic about the small-business assistance package but its half-life was even less than we expected.”
Tony Abbott said yesterday that the global economy was delivering mixed results. “I can understand why people are anxious because, plainly, we’ve seen bad news in China,’’ the Prime Minister said. “China’s growth is still strong, but it’s slower than it was. I’m pleased that growth is picking up strongly in the United States, I’m pleased that Europe seems to be finally going forward. So, there are good things as well as disturbing things happening in the world economy.”
Labor’s Treasury spokesman Chris Bowen said the government could not blame the global economy for the weakness in Australia’s economic growth. Although exports were down, so too was business investment and housing construction, while consumption was weak.
He said Joe Hockey was in a “parallel universe” asserting that the economy was “growing well”.
The IMF said implementing policy to lift actual and potential growth had “taken on an urgency” since the G20 finance ministers meeting in February because of the risk of a deeper downturn. It urged countries to do more to lift public infrastructure investment and undertake reforms to lift competition. It said budget strategies could include lowering marginal personal income taxes and company taxes, financed by cuts to unproductive spending or base-broadening measures.
Mr Abbott told 2GB interviewer Alan Jones yesterday that any increase or broadening of the GST would only make sense if the overall tax burden was lowered.
The IMF said the recovery in the advanced world was weaker than it expected while emerging economies were slowing. “World trade in volume terms contracted in the second quarter, highlighting the failure of investment to pick up as expected,” it said.
The slowdown in China was also having a broader impact on trade than had been expected.
The IMF warned advanced-country central banks against raising their interest rates, as “accommodative monetary policy remains essential”.
- THE AUSTRALIAN
- SEPTEMBER 04, 2015 12:00AM
David Uren
[Image: david_uren.png]
Economics Editor
Canberra
[Image: 875281-c56ebb20-5234-11e5-af2f-e6e8604c3982.jpg]
Retail trade. Source: TheAustralian
[b]China is emerging as one of the biggest risks to the global economy, with the International Monetary Fund calling on G20 finance leaders meeting this weekend to help avoid a new worldwide downturn by doing more to lift productivity and stimulate demand.[/b]
The fund is preparing to slash growth forecasts for the global economy, with this year shaping up as the weakest since the 2008-09 global financial crisis. The downgrade comes just two months after the fund last cut its estimates.
While “emerging” countries such as China, Brazil and Russia helped pull the world out of the crisis, their easy money and budget stimulus policies were threatening to pull the global economy down. The extent of the downgrade will be made public next month, but the IMF is expected to cut its estimate for global growth this year from 3.3 per cent to 3.1 per cent, with emerging country growth possibly dropping below 4 per cent.
In a report prepared for G20 finance ministers and central bank governors meeting in Turkey tomorrow, the fund says that if any of the risks confronting the global economy were realised, “it would imply a much weaker outlook” than this downgrade.
Start of sidebar. Skip to end of sidebar.
End of sidebar. Return to start of sidebar.
The IMF says world trade, on which the growth of these countries has relied, is now falling. They are also having to cope with lower commodity prices, high company debts and the potential for disruption once the US starts raising interest rates.
[Image: 896235-03f1608c-5235-11e5-af2f-e6e8604c3982.jpg]
Director of the IMF Christine Lagarde.
“Global growth remains moderate, reflecting a further slowdown in emerging economies and a weak recovery in advanced economies,” the fund says. “Productivity growth in both advanced and emerging countries continues to be low.”
The fund says G20 governments and their central banks should be doing more to boost demand. Governments with the budget scope to lift spending in areas such as infrastructure should be doing so, while central banks should keep rates low.
The Abbott government’s effort to lift demand with tax cuts for small business appears to have produced only a short-term increase in spending. Retail figures released yesterday show sales fell 0.1 per cent in July, the first dip in spending since May last year.
Stores selling office equipment, electrical and household goods had the biggest fall. Sales of electrical goods were down 3.3 per cent and are back to pre-budget levels.
Citigroup economists Josh Williamson and Paul Brennan said: “We were never optimistic about the small-business assistance package but its half-life was even less than we expected.”
Tony Abbott said yesterday that the global economy was delivering mixed results. “I can understand why people are anxious because, plainly, we’ve seen bad news in China,’’ the Prime Minister said. “China’s growth is still strong, but it’s slower than it was. I’m pleased that growth is picking up strongly in the United States, I’m pleased that Europe seems to be finally going forward. So, there are good things as well as disturbing things happening in the world economy.”
Labor’s Treasury spokesman Chris Bowen said the government could not blame the global economy for the weakness in Australia’s economic growth. Although exports were down, so too was business investment and housing construction, while consumption was weak.
He said Joe Hockey was in a “parallel universe” asserting that the economy was “growing well”.
The IMF said implementing policy to lift actual and potential growth had “taken on an urgency” since the G20 finance ministers meeting in February because of the risk of a deeper downturn. It urged countries to do more to lift public infrastructure investment and undertake reforms to lift competition. It said budget strategies could include lowering marginal personal income taxes and company taxes, financed by cuts to unproductive spending or base-broadening measures.
Mr Abbott told 2GB interviewer Alan Jones yesterday that any increase or broadening of the GST would only make sense if the overall tax burden was lowered.
The IMF said the recovery in the advanced world was weaker than it expected while emerging economies were slowing. “World trade in volume terms contracted in the second quarter, highlighting the failure of investment to pick up as expected,” it said.
The slowdown in China was also having a broader impact on trade than had been expected.
The IMF warned advanced-country central banks against raising their interest rates, as “accommodative monetary policy remains essential”.