Trade war on agenda for PM visit: Cormann

Finance Minister Mathias Cormann says the prime minister will “obviously” urge the US to resolve its trade issues with China during an official trip to Washington.

Mr Morrison arrived in the US on Thursday for a week-long visit, which includes a state dinner with President Donald Trump.

Labor wants Mr Morrison to use his visit to push for an end to the damaging trade war as a new report showed it is endangering the outlook for global economic growth.

“We obviously always call on both the US and China to resolve their issues as swiftly as possible because that is in Australia’s interest,” Senator Cormann told Sky News on Friday.

“We believe it is in the interest of the United States and China and indeed it is in the interests of nations around the world.”

The Organisation for Economic Cooperation and Development warned escalating trade policy tensions are taking an increasing toll on confidence and investment, and endangering future growth prospects.

In its interim Economic Outlook released on Thursday, the Paris-based institution cut its forecasts for world growth and slashed its predictions for Australia for this year and next.

It now expects Australia to grow at just 1.7 per cent in 2019, only slightly above the 1.4 per cent recorded in the year to June, and lower than a forecast 2.3 per cent expansion in its Economic Outlook in May.

It also cut its forecast for 2020 to two per cent from 2.5 per cent.

Economist Chris Richardson believes Australia is doing better than people think in terms of national income, which has helped return the federal budget to balance.

“The world’s largest beneficiary from the trade war to date has been Australia,” the Deloitte Access Economics partner told the Committee for Economic Development of Australia’s State of the Nation conference in Canberra.

That’s because as China’s economy has slowed, it has beefed up stimulus measures that demand coal and iron ore, Australia’s biggest exports.

Added to that, tragedies in Brazil and the closure of mines has seen big price increases for those resources.

“They’re off their peaks but they are still pretty high,” Mr Richardson said.

Even so, financial markets see a strong chance of the Reserve Bank cutting the cash rate again to 0.75 per cent from one per cent next month, following Thursday’s unexpected rise in the jobless rate to 5.3 per cent from 5.2 per cent.

Economists at National Australia Bank joined a chorus of other financial institutions bringing forward to October expectations of a cut from November, and are also predicting a further cut to 0.5 per cent by the end of the year.

“We still think that unless there is meaningful fiscal stimulus, the RBA is likely to cut to 0.25 per cent and adopt unconventional policy by mid-2020,” NAB said in a note to clients.

So far, the federal government has resisted calls to do more in terms of fiscal policy, believing it has done enough through tax cuts and planned infrastructure.

Victorian Treasurer Tim Pallas said his state already has a backlog of big projects.

“We can’t keep looking at just the big projects,” he told the CEDA conference.

“You’ll pay a heck of a lot more for a heck of lot less going forward.”

Instead, smaller projects have to be considered, like “filling a pot hole” or building small community facilities.

NSW treasurer Dominic Perrottet agreed.

“That’s probably where the federal government …might want to give extra support, for maintenance,” he said.

AAP

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