Aust growth, inflation will slow in 2008, report

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Australian economic growth will slow in 2008 as the global economy struggles against the credit crunch and high inflation, a survey finds.

However, the nation’s inflation problems are expected to ease by Christmas.

Business and consumer credit-check firm Dun and Bradstreet (D&B) says it expects Australian gross domestic product (GDP) growth to slow to an annual pace of three per cent by the end this year.

That would be well below the GDP expansion pace of 3.6 per cent in the year to March but still above D&B’s world growth forecast of 2.8 per cent for 2008.

D&B chief executive Christine Christian said global growth would ease in 2008 as the credit crunch and inflation slowed consumer and business demand.

“The challenge policymakers are facing across the globe is that increasing interest rates – the traditional mechanism for curbing inflation – will not directly impact the oil and food prices that are driving inflation,” she said.

“We expect the major central banks will be in a tightening phase by the end of 2008 and into 2009.

“The impacts of higher interest rates, combined with the increased focus on prudent lending and cautious risk pricing that has resulted from the credit crisis, will continue to dampen credit demand for consumers and firms.”

The D&B quarterly Economic and Risk Outlook Report also forecast Australian headline inflation easing to 3.5 per cent in 2008.

Although that is above the Reserve Bank of Australia’s two to three per cent target band, the forecast is significantly below headline inflation of 4.2 per cent in the year to March, the highest since 2001 when the introduction of the goods and services tax drove price pressures.

Consumer price index data for the June quarter is due on Wednesday July 23, with economists expecting headline inflation to climb by a quarterly pace of 1.3 per cent, and 4.3 per cent over the year.

AAP

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