AUSTRALIA is heading for a fifth consecutive year of below-trend growth in 2012, with weakness in most of the economy offsetting spectacular growth in mining investment, Westpac chief economist Bill Evans predicts.
As the nation's commodity price forecaster told farmers that 2011-12 will be as good as it gets for farm incomes, Mr Evans, the first last year to tip that the Reserve Bank would have to cut interest rates, said the Reserve will deliver two more rate cuts in 2012 as job losses mount.
Speaking at the Outlook conference of the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES), he predicted that Australia would grow just 3 per cent in 2012, with unemployment rising to 5.75 per cent.
Mining investment would be ''spectacular'' but 40 per cent of it would go on imports. Household spending would be held back by the ''very unnerving'' combination of ''world-class'' household debt and falls in the value of the real estate assets supporting it.
''We need lower interest rates to arrest that disturbing trend,'' Mr Evans said. ''That would help with the labour market. I don't think Australia needs the highest rates in the Western world.''
Unveiling ABARES' annual forecasts, executive director Paul Morris said farmers are now enjoying ''the most positive incomes for about 30 years'' and should use their time at the top of the hill to plan for tougher days ahead.
Mr Morris urged farmers to focus production on ''the highest-value markets, the middle-income countries to our north''. They want to eat more meat, fruit and vegetables, he said, which implies that farms should move away from cereals back to sheep and cattle.
The conference heard sharply different short-term forecasts for the world economy, although similar concerns for the medium to long term. Mr Evans predicted China's growth would slow to 7.5 per cent this year, bringing world growth down to 2.8 per cent - apart from 2009, its weakest year since the ''tech wreck'' of 2001.
But chief economist of J.P. Morgan in New York Bruce Kasman said the world economy is lifting already, with the US likely to grow at 2.5 per cent to 3 per cent, and China growing at 9 per cent by mid-year.
But he warned that this was under threat from the ''unsustainable'' budget cuts demanded in Europe and from the political impasse in the US over deficit cuts.
