gloom overdone: forecaster

Peoples mindset needs to change.


Tim Colebatch
July 21, 2008
MIGRATION into Australia is set to soar again to a record level of almost 200,000 this financial year, pulling the economy up with it and ensuring a much stronger year than Treasury and the Reserve Bank are forecasting, Access Economics predicts.

In its latest quarterly Business Outlook, released today, the Canberra-based consultants take sharp issue with Treasury and Reserve forecasts of a sharp slowing of growth in 2008-09.

Access predicts that on balance, Australia is in for a fairly normal year in 2008-09: booming domestic demand, average growth in output, more strong employment growth and inflation remaining outside the Reserve's target band.

Access has joined another highly regarded economic forecaster BIS Shrapnel to argue the pessimism is being overdone, and economists and investors have not adequately counted the strengths pushing the economy.

Apart from soaring terms of trade and the Federal Government's tax cuts, it says, the pessimism ignores:

- The Federal Government's decision to lift the migration intake by a further 37,500 in 2008-09, of whom 31,000 will be skilled migrants and their families. Access estimates net migration this financial year will climb to 195,000, up from an estimated 188,000.

Access notes a survey in New Zealand found one in 10 people living there want to migrate to Australia in the next 12 months.

- Strong business investment plans, led by the mining sector, registering in the official Bureau of Statistics survey and Access' own quarterly Investment Monitor of major projects under construction, committed, or in planning stages.

Access predicts that GDP will grow by 3.3% in 2008-09, as against Treasury's forecast of 2.75%, the 2.5% implied in the Reserve's May bulletin, and the 2.4% tipped by forecasters other than BIS-Shrapnel in mid-year economic survey.

Access predicts a surge in exports but this is offset by faster growth in imports because the real economic driver will be business investment, above all in WA and Queensland.