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To: John Mansfield who wrote (23869)	12/6/1998 11:33:00 AM
From: Alex	Respond to of 116766

Gold saves the day amid Asian turmoil By PHILIP HOPKINS Victoria's exports have fallen because of the Asian economic turmoil, the decline hidden by an unusual rise in gold trade, according to the Victorian Treasury. But the state's exporters have generally weathered the Asian storm well, finding new markets in Europe, North America and other parts of Asia. These were two key points made by the Treasury in its September review of the Victorian economy. The review said that in the six months to August 1998 compared with the same period a year earlier, the value of Victorian exports rose by $54 million, or 0.8 per cent. This figure excluded a Commonwealth export, the sale of a frigate to New Zealand, in May last year. (The Asian crisis is considered to have begun with the floating and devaluation of the Thai baht in July 1997). Treasury said that increased exports of gold, miscellaneous and confidential items were largely responsible for this rise. ''Excluding these items, Victorian merchandise exports actually fell by $264 million, or 3.8 per cent,'' the review said. Imports into Victoria rose 21.9 per cent over the same period. This included a one-fifth rise in imports from each of South-East Asia, North-East Asia and the US. Treasury said Victorian and national data had been distorted by the strong rise in gold trade. According to ABARE, three factors explained this surge in gold imports for processing and re-export. Firstly, there was a greater flow of gold scrap from Asia early this year. Secondly, there was a big one-off gold export to the US after a fire at a Melbourne refinery. The gold was subsequently re-imported, processed and re-exported. Thirdly, there was a rise in Korean import-export trading associated with arbitrage-driven schemes by Korean companies. The Treasury also noted that much of the gold exported from Victoria was mined outside the state. The review said that net exports were likely to have cut economic growth over the past year, but the extent would not be known until the ABS published official gross state product estimates early next year. The Treasury report was generally upbeat about the economy. Its main features included: Overall expenditure picked up strongly, with state final demand, driven by consumer spending and equipment investment, rising 4.3 per cent in the 1997-98 year. This has cushioned the economy against the Asian turmoil. Private business expenditure is at a record high, rising 3.9 per cent in the June quarter. In the pipeline are $1.24 billion on existing building projects and $740 million engineering projects. The housing sector has surged since mid-1996, driven by a rise in home loan affordability, stronger population growth and demand for investment properties. Strong employment growth, with Victoria accounting for one third of all new jobs created nationally. Victorian employment has risen for 15 consecutive months, with 64,000 new jobs over the past year. Respectable growth in consumer spending (0.7 per cent in June quarter) and strong retail growth (more than 1 per cent in four months to August). New motor vehicle registrations at record levels in 1997-98 (more than 17,000 in August). Population growth of 1.1 per cent to 4.65 million in March, reversing population losses to other states. Victoria gained interstate migrants in the December and March quarters for the first time since records began in 1981. Manufacturing output, which accounts for one fifth of total production in Victoria, believed to have expanded in the June quarter along national lines. (The Bureau of Statistics does not publish quarterly state manufacturing details). In farming, Victorian winter crop production was forecast to rise 42 per cent to 4.4 million tonnes after the passing of El Nino. Yields were predicted to be above average for all crops. (The report was produced before the recent frost and rain that have damaged Wimmera crops). The Treasury report said exporters had successfully diverted products away from the troubled Asian markets. Over the two six-month periods to August in 1997 and 1998, a 42 per cent fall in exports to South-East Asia and Korea was more than offset by a 2 per cent rise to other Asian countries (including Japan), and a 28 per cent rise to the rest of the world. ''This partly reflects solid demand conditions in the United States and Europe, which has offset weaker Asian demand,'' the report said. ''The decline in the Australian dollar against the US dollar and European currencies has also improved the competitiveness of Victorian exporters in these regions.'' Tourism had held up well, with the number of international visitors to Victoria rising 3 per cent in the year ending in March 1998. Asian arrivals were down 5 per cent, while US and European arrivals were up 6 per cent and 4 per cent respectively. The Treasury said the impact of the explosion at Esso's Longford plant on state final demand and gross state product was difficult to assess. theage.com.au