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Drought tightens grip on Australia
By Geoff Hiscock
SYDNEY, Australia (CNN) -- The drought now gripping Australia could be the worst on record and deliver a growth cut of 0.75 percentage points, according to a leading economist. SG Australia chief economist Glenn Maguire told CNN on Thursday that at a time of global slowdown, the drought's impact would deliver "quite a big hit" to the Australian economy. Australia has been one of the star performers among the world's advanced economies this year, growing at a rate of between 3.75 percent and 4.0 percent. But economic forecasters have been warning for some time that the drought, combined with the volatile international situation, will cut the growth outlook sharply. Another threat comes from bushfires, with Australia's biggest city, Sydney, already suffering housing losses this week in an early taste of hot, dry conditions. Dry for almost a yearMuch of Australia has been in drought for six months with some highly productive agricultural areas of Queensland, New South Wales and Western Australia having been dry for almost a year. News South Wales Premier Bob Carr said on Wednesday that more than 90 percent of New South Wales, the most populous Australian state, was now officially in the grip of drought. He warned on Wednesday that in combination with global slowdown, this could lead to heavy job losses in rural areas and in associated industries. Maguire's prediction of a 0.75 percentage point growth cut is higher than a similar warning from the government's national commodity forecaster, ABARE, last month. (Full story) ABARE executive director Brian Fisher said on September 23 that the drought would "significantly affect" the farm sector in 2002-03 and would cut Australia's rate of economic growth in 2002-03 by about 0.5 percentage points, or Aust. $3.8 billion ($2.1 billion), from what would have otherwise been achieved. Fall in farm output
Fisher said the gross value of farm production was likely to fall 16 percent to A$32.2 billion ($18 billion) in the year to June 2003. Maguire told CNN it was possible the 2002 drought would go past the severe drought of 1982-83, which culminated in devastating bushfires. Already this week, about a dozen houses on the outskirts of Sydney have been destroyed by a bushfire, and large fires are burning in various parts of the state. (Full story) Maguire noted that a severe rainfall deficiency in the key winter crop sowing period of April to August has meant a significant drop in grain yields. He said the impact extended beyond grain through to weaker meat and livestock exports. "This drought could be the worst on record and could be very damaging to the economy," he said. No. 2 wheat exporterAustralia is the world's No. 2 wheat exporter, but ABARE has already predicted that winter grain production will fall 40 percent in 2002-03. (Full story) The slump, from 37 million tonnes down to 22 million tonnes, will make it the lowest winter crop harvest since 1994-95. Wheat futures have risen in recent months on expectations that delayed harvests in North America, along with the Australian drought, will put pressure on global supplies. Wheat prices are up about 30 percent this year, with wheat for December delivery trading at $3.81 a bushel on the Chicago Board of Trade Wednesday. That is down from a five-year high above $4.30 last month. Earlier this week, the country's biggest bank, the National Australia Bank, said weakness in agribusiness revealed in its September survey reflected the deterioration in rural conditions. The NAB said the survey showed the Australian economy still had "considerable domestic momentum" but the outlook was clouded by geopolitical tensions, share market falls, and the drought. The Australian Bureau of Statistics (ABS) estimates that 40,000 jobs have been lost so far because of the drought.
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