Economic ‘collision course’

Press, 1 March 1989, Page 42

Economic ‘collision course’

NZPA-AAP Sydney The international economy was on a collision course between fast international trade expansion and rising world inflationary expectations, the chief economist of the investment bank Dominguez Barry Samuel Montague, Mr Ray Block, said.

In an address to the Committee for Economic Development in Australia (C.E.D.A.), Mr Block said the collision can only lead to stagflation or recession. “Both the I.M.F. (International Monetary Fund) and the O.E.C.D. continue to believe that 1989 and 1990 will be safe years of sustained growth, but the collision course ahead is becoming rapidly more visible week by week,” Mr Block said.

“The confidence of the international agencies may be justifiable, but many private economists are much less optimistic.” He said there was already a growing consensus in the United States among economists of a U.S. recession, due to begin either in the December quarter of 1989 or during early 1990.

If the forecasts are correct the “probabilities suggest that a U.S. recession would spread to Europe and Asia, including Australia,” given the quick transmission and interdependence in trade.