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Australia, South Korea Report Slower Economic Growth

  • Megan Larson
  • Heda Bayron

Australia's economy is expanding more slowly than expected due to a couple of factors, including flat growth in net exports. Gross domestic product is up .7 percent -almost double the rate in the quarter ending in December 2004, but below the expectations of many economists.

Australian Treasurer Peter Costello says a drought hitting half of the country's farmland is dragging on economic growth. "Agricultural product is 16 percent lower over the year to the March quarter so that is quite a significant impact," he said.

According to the Bureau of Statistics, first quarter exports increased by a modest one percent over the previous quarter, while imports grew by two percent.

South Korea's economic growth has also been slower than the government hoped, with a 2.7 percent gain in the first quarter. The finance ministry warns the country may miss its target of five percent growth for the year if conditions do not improve.

Consumer prices fell two-tenths of a percent in May - the first decline since last November, and the Bank of Korea says business confidence has deteriorated.

The good news is that exports rose almost 12 percent in May to about $23 billion. However, Joseph Lau, an economist for the investment bank Credit Suisse First Boston, says the role of exports in South Korea's GDP is declining. "The strength of expansion in net trade that we saw in 2004 - the momentum there - has been slowed down now for the past couple of quarters," he said.

Mr. Lau says less global demand for South Korea's goods and weaker domestic consumption has hampered the economy.

Fuel prices are still taking a bite out of airline profits. Air New Zealand has lowered its pre-tax annual profit forecast to $153 million, down from $167 million, while Malaysia Airlines reports an after-tax profit of $86 million, which is down 30 percent from last year. Despite the fuel costs, Malaysia Airlines officials are upbeat, as the number of passengers is up.