International Outlook
Extreme risks to the international economy have eased, but challenges remain
The European Central Bank's (ECB) announcement of Outright Monetary Transactions has helped to reduce the extreme downside risks to the global economy from a potential break-up of the euro area. Signs that the US housing market is starting to pick up also offer some encouragement, and growth is expected to rise in China in 2013 as well.
However, the economic outlook for the euro area remains weak, with further difficult structural reforms needed across much of the region. Meanwhile, in spite of the recent re-election of President Obama, the economic outlook in the US is overshadowed by political disagreements which could delay a credible medium-term path to fiscal sustainability. One large unknown is the extent to which ongoing economic challenges in the developed economies will constrain growth in the emerging markets, including China.
As Australia's largest export market, developments in China will also have significant knock-on implications for the economic prospects of our largest trading partner. The Australian outlook remains favourable by international standards, although the slowdown in mining investment is greater than previously forecast.
Trading partner growth (TPG) of 3.4% is expected in both the 2012 and 2013 calendar years - slightly below the 30-year average growth rate of 3.8%. In a reflection of New Zealand's increasing trade links with China and other Asian economies, TPG is expected to recover to its long-run average growth rate in the later years of the forecast period, albeit at a slightly slower pace than expected at the time of the Budget Update.
|
2012 Weights |
2011 Actual |
2012 Forecast |
2013 Forecast |
2014 Forecast |
2015 Forecast |
2016 Forecast |
2017 Forecast |
|
|---|---|---|---|---|---|---|---|---|
| Australia | 28% | 2.1 | 3.6 | 2.9 | 2.7 | 3.1 | 3.2 | 3.2 |
| China | 15% | 9.3 | 7.7 | 7.8 | 7.6 | 7.3 | 7.0 | 7.0 |
| United States | 11% | 1.8 | 2.2 | 2.0 | 2.3 | 2.4 | 2.5 | 2.5 |
| Euro area | 9% | 1.5 | -0.6 | -0.2 | 1.0 | 1.2 | 1.3 | 1.4 |
| Japan | 9% | -0.7 | 2.2 | 1.0 | 1.3 | 1.1 | 1.0 | 1.0 |
| United Kingdom | 4% | 0.8 | -0.1 | 1.0 | 1.4 | 1.8 | 2.0 | 2.0 |
| Canada | 2% | 2.4 | 2.0 | 2.0 | 2.3 | 2.4 | 2.5 | 2.5 |
| Other Asia* | 23% | 4.6 | 3.7 | 4.4 | 5.0 | 5.0 | 5.0 | 5.0 |
| Trading partners | 100% | 3.2 | 3.4 | 3.4 | 3.6 | 3.7 | 3.8 | 3.8 |
| Consensus (November 2012) | 3.2 | 3.3 | 3.4 | 3.8 | 3.9 | 3.9 | 3.8 | |
| IMF(October WEO) | 3.2 | 3.3 | 3.6 | 3.9 | 4.1 | 4.2 | 4.2 |
* South Korea, Taiwan, Hong Kong, Singapore, Malaysia, Indonesia, Thailand, Philippines, India
Sources: IMF, Consensus Economics, the Treasury
