economic outlook

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    from ABC Online

    A new economic study says a war in Iraq will not have a major impact on the Australian economy.

    The latest economic outlook from BIS Shrapnel is forecasting growth of 2.9 per cent for the 2003 calendar year, growing to 4.9 per cent next year.

    The study suggests a major investment boom is not far off but remains on hold due to the drought, the weak global economy, the housing decline and the threat of war.

    BIS Shrapnel chief economist Dr Frank Gelber says an attack on Iraq will restrict growth by no more than 0.5 per cent.

    "A war would have a relatively minor effect on the Australian economy," Dr Gelber said.

    "We're isolated from it and at the end of the day, the thing that's really affecting us now is the uncertainty associated with whether we're going to have a war or not.

    "When you relieve that uncertainty, people will stop sitting on their hands and start to make decisions instead."

    Dr Gelber says despite the drought, a softening in housing construction and the prospect of war, the underlying economy is strong.

    "Pessimism, now generally in Australia and overseas, incidentally is what's holding the economy back," Dr Gelber said.

    "So uncertainty is always a bad thing because people sit on their hands and delay expenditure decisions, so this is not the right environment to undertake new investment."

    Dave R.
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