Australia’s economy and related exchange traded fund (ETF) was dampened by flooding, but the pace could pick up as the country capitalizes on its commodities reserves.
Australia’s government stated that the economy inched up 0.7% in the fourth quarter after record floods and major cyclones hampered growth, according to BusinessWeek. Treasurer Wayne Swan believes that growth for the quarter would have been 0.4% higher if it weren’t for the flooding.
Their impact continues: natural disasters could diminish economic growth by 1% in the first quarter. Furthermore, the balance of goods and services and Australian building approvals were both hit by the disasters, according to The Sydney Morning Herald. [5 ETFs Affected by Australia’s Cyclone.]
But Australians are already looking at ways to jump-start their recovery:
- Wayne Cole for Reuters says analysts remain optimistic that growth will increase over the next couple of years on higher Chinese and Indian demand for commodities. Australia’s commodity forecaster estimates that export earnings from resources could jump 29% in the year to June 2011, followed by another 14% the following year.
- The mix of consumer caution and rising business sentiment will allow the Reserve Bank of Australia to keep cash rates at 4.75% for a couple of months. The Central Bank projects that annual economic growth could shot up to 4.25% by year’s end on increased business investment.
For more information on Australia, visit our Australia category.
- iShares MSCI Australia (NYSEArca: EWA)
Max Chen contributed to this article.