Fed: Business survey shows economy in pretty good shape

00-00-0000
Fed: Business survey shows economy in pretty good shape

By Krista Hughes, Economics Correspondent

CANBERRA, April 15 AAP - Business conditions slumped in the March quarter amid wartensions, jumpy sharemarkets and weak global conditions but a new survey concluded theeconomy remained in pretty good shape.

The National Australia Bank quarterly business survey showed there was a broad-basedslowdown in business conditions in the first three months of the year.

The falls were biggest in utilities, recreation, personal services and manufacturing,while weak share markets and geopolitical concerns dented confidence.

But the hope of a break in the drought boosted agribusiness conditions, while low interestrates underpinned construction.

NAB said the results indicated economic growth of about four per cent outside the farmingsector in the first half of the year, with the economy tipped to expand by a total of2.75 per cent in 2003.

"The Australian economy and, in particular, the non-farm business sector remains inpretty good shape - notwithstanding geopolitical tensions, volatility in financial markets,as well as a sluggish external environment," chief economist Alan Oster said.

Treasurer Peter Costello said the combination of an international economic downturn,high oil prices, drought and the war would normally have sent the economy into recession.

"We've been through a pretty rough 12 months," Mr Costello told Sydney radio 2UE.

"Normally the Australian economy would be in severe recession by now, and the factthat it's still growing indicates how resilient it's been."

The treasurer also welcomed a slowing in booming east coast property prices, sayingthe rises of the last few years had been unsustainable.

"Sooner or later prices have got to stabilise and I think there is evidence of thathappening, yes," Mr Costello said.

But international ratings agency Fitch Ratings warned property prices were more exposedthan ever to a crash in the event of an economic downturn.

Fitch said average house prices had risen to almost 6.8 times average income in 2003,from 4.5 times in 1993 and the debt-servicing strain left the market exposed to risingunemployment or interest rates.

It also noted the recent construction boom was bringing more new properties onto themarket, saying fundamental weakness in this sector could have a negative impact on theproperty market.

New figures today showed a rebound in borrowing for investment in residential construction,up 69 per cent to $613 million in original terms, but still short of the record $979 millionin December.

Borrowing for property investment overall rose 14 per cent to $4.78 billion in February.

Westpac senior economist Andrew Hanlan said weak sharemarkets in early 2003 had encouragedproperty investors but he expected investor finance to ease later in 2003 and into 2004.

The Australian Bureau of Statistics said personal borrowing on credit cards, personalloans and overdrafts jumped 4.7 per cent in February to $6.1 billion, allowing for seasonalfactors.

Commercial lending recovered 4.6 per cent to $20.7 billion after plunging 15.2 percent in January.

AAP kmh/sb/mo

KEYWORD: ECONOMY NIGHTLEAD