Dimmer Aust. outlook

Press, 24 March 1988, Page 32

Dimmer Aust. outlook

By

RON CORBEN

NZPA-AAP ! Sydney Australia’s | current bright econom c outlook is set to;dim late in 1988 as the present positive economic ftindamentals change, according to Wardley ’ Australia, Ltd, economist, Mil Jeff Schubert. ; ’ f | I In Wardley’sl March bulletin, Mr Schubert said; the key elements of the dimmer economic outlook 5 would be wdaker com-l modity prices, | a i pick-up in Australia’s imports, a stalling in the decline in the! current account deficit, a slowing in real wage cuts and stronger ! inflation. ! As a result, the Australian dollar may j become more!fragile] and interest

rates may rise later in the year. I “Not only will the economic outlook appear less bright, but the (August Federal) budget may not meet market expectations,” Mr Schubert said. He said the Federal Government would find it harder tojind areas to cut expenditure than in past years. "Past cuts make future cuts more difficult and better economic conditions appear to make them less necessary.” Mr Schubert said the problems facing the market were related to the increased expectations associated with the 1988-89 budget surplus. ; "At present most financial market economists and business groups are

calling for a surplus of $3.0 to $3.5 billion.” , | “Of course, if government spokesmen were |to indicate that a surplus !of this order of magnitude was achievable these economists and business groups would call for an even larger surplus, (which indicates that these economists aiid groups have their own credibility problem).” ! But not one now believed the Government when it said that such surpluses were not achievable. | Expectations of a budget surplus of that magnitude would -only serve; to make Australia more Sattractive and increase the risk of upward pressure on the dollar in the first half of 1988, Mr Schubert said.