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UN upbeat on Australian, NZ economies

NZ Newswire logoNZ Newswire 1/05/2017 Ron Corben

The United Nations says Australia's economy remained on a positive trend but weak commodity demand in China and global economic uncertainties remain "downside risks".

The UN's Economic and Social Commission for Asia and the Pacific (UNESCAP) in its latest regional survey, released on Monday, said Australia's growth was forecast at 2.7 per cent in 2018.

The survey said export receipts would benefit from higher production of iron ore and liquefied natural gas and a weaker exchange rate. An expected recovery in wage growth and low interest rates would also provide a boost to household consumption.

But UNESCAP warned of relatively high unemployment rate at around 6.0 per cent in 2016, and high household debt. Inflation is also forecast to rise from 1.9 per cent in 2017 to 2.3 per cent in 2018, due to rises in energy prices, labour costs and a tobacco excise tax. "Key downside risks include weak commodity demand in China and heightened global economic uncertainty," the report said.

The UN was also upbeat over the New Zealand economy with net migration and tourism sector continuing to support the economy. UNESCAP said construction activity would be boosted by reconstruction efforts following the Kaikoura earthquake last November. Low inflation and financing costs would boost private consumption, although some constraint from rising prices for housing and high household debt.

The UN report raised concerns over any further rapid increases in housing prices, leading to "capacity constraints in the construction sector where skilled workers are already in shortage". UNESCAP says China's growth will dip slightly to 6.4 per cent in 2018 from 6.5 per cent in 2017.

The UN says as supply side reforms continue, industrial sectors are expected to grow "as a more sustainable pace". But China's consumer spending "is likely to propel economic growth as exports are expected to improve only gradually in the wake of rising trade protectionism," the report said.

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