Aussie commodities forecaster tips economic growth

Australia's official commodities forecaster on Tuesday predicted the economy would grow 0.5 percent in 2009-10 but warned the country's soaring currency would erode the value of agricultural exports.

The 0.5 percent growth forecast from the Australian Bureau of Agricultural and Resource Economics (ABARE) is a turnaround from the minus 0.5 percent contraction predicted by the government in its May budget.

Economic growth strengthened in the first half of 2009 and consumer spending remained strong thanks to low interest rates and government stimulus worth tens of billions of dollars, ABARE said.

"Economic growth in Australia is assumed to average around 0.5 per cent in 2009-10," it said.

But the forecaster warned there was a downside to the economic resurgence, with the strong Australian currency reducing the value of export contracts largely written in US dollars.

It said the Australian dollar, which has risen to 0.86 US cents from 0.63 US cents in February, was likely to remain at 0.83 US cents throughout 2009-10.

"Although winter crop production is forecast to increase in 2009-10, an assumed higher average of the Australian dollar is expected to lead to lower farm export earnings in the short-term," ABARE said.

It said total earnings from Australia?s commodity exports were likely to fall by 20 percent to 158 billion dollars (137 billion US) in 2009-10.

Farm exports were forecast to fall 2.5 percent to 31.1 billion dollars in 2009-10, with energy and minerals exports likely to drop 23 percent to 123 billion dollars as bulk commodities such as coal and iron ore brought lower prices.