IMF: Australia's economic growth prospects slip over the US-China trade war

Getty / VCGShopping in Hangzhou, Zhejiang Province of China.
  • The IMF forecasts Australia’s GDP at 3.2% growth this year before slipping to 2.8% next year.
  • The World Economic Outlook forecast was revised down due to trade measures, including the tariffs imposed on $US200 billion of US imports from China.
  • The downward revision for Australia relative to the April forecast “partially reflect the negative effect” of those trade measures.

The IMF has reduced its economic growth forecast for Australia because of the negative impact of an escalating trade war between the US and China.

Globally, the International Monetary Fund says economic growth is projected at 3.7% for 2018–19, or a 0.2 percentage point lower than forecast in April.

The World Economic Outlook forecast was revised down due to trade measures, including the tariffs imposed on $US200 billion of US imports from China.

Australia would hit 3.2% growth this year before slipping to 2.8% next year. In April the IMF was forecasting 2.9% for next year.

The May federal budget forecast 3% GDP in 2018–19 and the same the following financial year.

According to new economic modelling by KPMG, an all-out US-China trade war could cut 60,000 Australian jobs and shave real wages by $16 per week for the average worker.

The IMF forecasts:

IMF

The IMF says the downward revisions to the 2019 growth forecast for Australia relative to the April forecast “partially reflect the negative effect” of the trade measures.

“Escalating trade tensions and the potential shift away from a multilateral, rules-based trading system are key threats to the global outlook,” says the IMF.

“Since the April 2018 WEO (World Economic Outlook), protectionist rhetoric has increasingly turned into action.

“An intensification of trade tensions, and the associated rise in policy uncertainty, could dent business and financial market sentiment, trigger financial market volatility, and slow investment and trade.

“Higher trade barriers would disrupt global supply chains and slow the spread of new technologies, ultimately lowering global productivity and welfare. More import restrictions would also make trade-able consumer goods less affordable, harming low-income households disproportionately.”

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