Nov. 9 (Bloomberg) -- Australia's economy may be hit harder than expected as the global economic slowdown spreads to emerging markets that are among the nation's key trading partners, Treasurer Wayne Swan said, citing a World Bank report.
The report, shown to finance ministers and central bank heads meeting in Brazil, shows the crisis that began in advanced economies is spreading to the developing world. That threatens Australia's extensive trade with countries in Asia and elsewhere, Swan said in comments to journalists e-mailed to Bloomberg News by his office in Canberra.
``We had already factored in a slowing of Australian growth and world growth,'' Swan said. ``It appears from this World Bank report that the slowing in growth will be more dramatic than many had thought previously.''
A bit light on numbers....
Last week, the government slashed its forecast budget surplus by 75 percent, saying the slowest economic growth in eight years will erode tax revenue. On Nov. 6, the International Monetary Fund approved a $15.7 billion loan to Hungary to shore up an economy it said was among the first emerging markets to be ravaged by the financial crisis.
``Finance has been drying up for the emerging world,'' said Shane Oliver, senior economist at AMP Capital Investors in Sydney. ``Most of Australia's exports go to Asia, and if those economies are slowing down more than expected it'll cut into demand for our exports.''
Swan spoke to journalists after the first day of a meeting in Sao Paulo of ministers and bank governors of the so-called Group of 20 industrialized and developing nations, a prelude to the G-20 leaders' meeting on Nov. 15 in Washington.
The summit is exploring the impact of the global financial crisis on the world's developing economies. Separately, European Union leaders completed proposals during the week for tighter worldwide financial regulation, which they plan to take to the Washington summit.
``It is very clear that in the past month or so emerging economies have entered a dangerous new zone,'' Swan said. ``That is the description of the World Bank in their report.''
Swan told journalists a consensus was emerging among G-20 ministers of the need for coordinated action to stimulate national economies, a further loosening of monetary policy and ``fundamental'' reform of the international financial architecture.
Australia's central bank has cut the benchmark interest rate by 2 percentage points since September, the most aggressive round of reductions since the economy was in recession in 1991. House prices dropped in the third quarter by the most since 1978 and retail sales in September had their biggest fall in three years.
The International Monetary Fund forecasts 1.8 percent growth for Australia's economy in fiscal 2009, Swan said last week.
``While the global financial crisis is causing a global recession, Australia is expected to continue to record modest growth and compares favorably with most other advanced economies,'' he said in an e-mailed statement.