Fed: Howard says premature to say worst of sharemarket fall over

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Fed: Howard says premature to say worst of sharemarket fall over

By Jim Hanna, Economics Correspondent

CANBERRA, Aug 13 AAP - Prime Minister John Howard today warned it was too early totell if Australia had escaped the worst of the United States stock market turmoil.

But he added that despite the shocks to the international economy, Australia was continuingto perform well.

His comments follow a survey showing Australian business activity holding up well despitehuge falls on global sharemarkets.

The National Australia Bank survey showed drought conditions and sharemarket upheavalwere affecting business confidence in Australia.

"The key finding of the National's business survey in July is that there is no signof any slowing in broad based business activity," NAB chief economist Alan Oster said.

Mr Howard said the survey showed that Australia was performing strongly, although therewas doubt because of the possible flow-on impact of the sharemarket falls in the UnitedStates and Europe.

"The (Australian) economy is going very well, extremely well given the internationalcircumstances," Mr Howard said.

"But it's too early to say that there are not going to be any ripple or flow-on effectsfrom what has and is occurring in the United States."

Treasurer Peter Costello warned that the turbulence on US sharemarkets could threatenAustralia if it weakened the American economy.

Americans had lost a lot of wealth after severe falls in the stocks they held, he said.

"That will start to affect American consumers and American confidence," he told Channel Nine.

Overnight, the Dow Jones Industrial Average closed 18.3 per cent below its 2002 high,while the technology-heavy NASDAQ index finished 36.5 per cent lower.

"If it feeds back in to the real economy, it could affect the American economy, whichwas in recession last year," Mr Costello said.

Australia, which kept growing while the US economy was in recession, would then facea fresh challenge, he said.

"If the American economy should be affected again in 2002 and 2003 and if global growthgoes down, (then) that will affect our exports.

"This will be another great challenge for the Australian economy."

Despite the gloom, a panel of international economists again tipped Australia to remainthe fastest growing economy in the industrialised world until next year.

The monthly survey by The Economist magazine gave Australia an average prediction of4.0 per cent GDP growth this year and 3.8 per cent in 2003.

That was ahead of Canada (3.3 per cent and 3.5 per cent) and the United States (2.7per cent and 3.4 per cent).

But Australia was also expected to have the third highest inflation rate of the 16economies surveyed in 2002 (2.8 per cent) and the second biggest current account deficitas a proportion of its economy (3.4 per cent in both years).

AAP jph/sw/hu/sb t

KEYWORD: ECONOMY NIGHTLEAD