Govt Estimate Of Australian Economic Growth Down 75 Basis Points On Drought Losses - BBC

[hatrack]

The Australian government has reduced its economic growth forecast after the worst drought in a century caused a 20% drop in farm output. Treasurer Peter Costello said in his mid-term review the economy was likely to grow 2.5% in the year to June 2007. That is down from his estimate of 3.25% in the May budget.

The economy expanded by just 0.3% in the three months to September, compared with the previous quarter, the slowest growth rate in more than three years.

"The Australian economy remains sound although it is buffetted by severe drought," Mr Costello said. "The downturn in the farm sector and related industries since the budget has reduced forecast growth by three quarters of a percentage point. "The risks to the economy are weighted to the downside, particularly if dry conditions persist."

Earlier this month it was revealed that Australia's key crop production fell by more than a third during the three months to September. And in November the Reserve Bank of Australia warned that the national drought was likely to slow economic growth, as a result of a drop in farming output.

EDIT

http://news.bbc.co.uk/2/hi/business/6196335.stm

Huh. Who knew those pesky "externalities" could be so . . . so . . . so real?!? Who knew?