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Doomsayers confounded

The end of the strong economy has been forecast for some considerable time. Here in Australia, doomsayers have steadfastly predicted that the world as we know it would grind to a halt with the Asian ‘contagion’ spreading its unsavoury wings.

However, despite these prophets of doom, the economy continues to baffle even the most bearish of economic forecasters. Now we appear to be seeing a modicum of change and a sense of impending prosperity creeping into forecasts.

The forecasters at Challenge Bank appear to be on this bandwagon. Their latest March quarter newsletter is almost bullish in its outlook when it suggests that “the current expansion will continue and will still be running above trend (3.2 per cent) in late 1999”.

The implications for the economy are that, as Challenge sees it, the prospect of an interest rate cut will recede. In fact, their forecasters expect a 0.5 per cent rise in official cash rates to 5.25 per cent in 2000 and the Australian dollar to rise to 64 US cents by the end of this year.

Implications for WA are intriguing. After a period of strong economic growth, the WA economy appeared to be losing momentum into 1999.

Pressure on the mining sector was seen to be the critical factor. Employment and consumer spending was also slowing. However, consumer confidence rose 2.5 per cent in the March quarter and the housing sector remained positive.

Latest unemployment numbers released also show continued strong growth in employment in WA for the last quarter.

So far Challenge economists have been reasonably accurate. Based on their relatively bullish outlook for the Australian economy, it is hoped that they are again.

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