SYDNEY, Jan 31: Australia’s prime minister on Saturday announced that the International Monetary Fund has downgraded the country’s growth forecast for 2009, estimating the economy would contract by 0.2 per cent.

“Notwithstanding the fact that we would have the highest growth among the major developed economies for the year ahead, we would nonetheless, according to the IMF, be just below zero without any further measures adopted,” Kevin Rudd told reporters.The IMF slashed its global economic outlook last week, predicting the financial crisis would slow growth to a virtual standstill this year.

It projected world growth to fall to 0.5 per cent in 2009, its lowest rate since World War II. The Fund did not address Australia’s outlook in the briefing last week. Its last estimate, in November, flagged growth for the country at 1.8 per cent, saying it expected Australia to “slow appreciably”.

Australia had expected to weather the storm better than most, with the government pinning its hopes on a still-growing China and associated commodities demand.

But Rudd said the Asian powerhouse had slowed much more than expected and a $200 billion slump in gross domestic product would wipe $3.2 billion from Australia’s export revenues.

“We see a weaker outlook for Australia,” said IMF Asia-Pacific division head Ray Brooks.

“Certainly, Australia’s been hit by the sharp decline in demand worldwide and the sharp fall in commodity prices,” he told the Australian Broadcasting Corporation.

The IMF figures were the second piece of bad news for Australia’s economy on Saturday, said Rudd, with data from the US showing its economy shrinking at an annualised rate of nearly four per cent at the end of 2008.

“The bottom line is this: The global economic recession is resulting in falls in economic growth, employment and revenues right across the world, including Australia,” said Rudd.

He blamed “unfettered free market fundamentalism and turbo charging greed” for the “carnage” of the current crisis, but said he stood by the government’s annual growth forecast of two per cent.

Rudd emphasised the government’s commitment to take “whatever action is necessary to deal with these falls”, increasing speculation he was preparing to announce a second major stimulus package.

A 10.4 billion dollar (6.9 billion US) economic stimulus package was released in December, aimed mainly at families and first-home buyers to boost consumer spending.

Analysts said the gloomy forecast showed a recession was all but inevitable, and increased pressure on the government to act.

“I think it does throw down the gauntlet,” CommSec chief economist Craig James told Australian Associated Press. He forecast a 125 basis point cut to the official cash rate on Tuesday, which is currently at 4.25 per cent.

Economists are widely predicting a 100 basis point cut to 3.25 per cent at the Reserve Bank of Australia’s monthly meeting, a 45-year low which would take the total cuts since September to 400 basis points. —AFP