AUSTRALIAN GOVERNMENT MUST CUT SPENDING, ANZ SAYS
  The government must announce harsh cuts
  in spending in its May 14 economic statement if it is to give
  an adequate response to Australia's economic problems, the ANZ
  Banking Group Ltd &lt;ANZA.S> said.
      Cuts of two billion dlrs would be insufficient against the
  backdrop of a 12 billion dlr government deficit and a 14
  billion dlr current account deficit, it said in its monthly
  Business Indicators publication.
      "For the past two years, the government has struggled with
  an economic reality that demands measures beyond those which it
  sees as politically practicable," it said.
      The political climate meant there would be a continued
  over-reliance on monetary policy to hold the exchange rate and
  maintain confidence in economic management, ANZ said.
      "The cost of this approach is that the much-needed revival
  of business investment will be further postponed," it said.
      The economy was now on a modest growth upswing boosted by
  export and import-replacement industries which had created a
  false suggestion that the worst adjustments to the balance of
  payments crisis were past. "Unfortunately, successful adjustment
  to Australia's deep-seated economic problems remains a
  long-term process," it said.
      In its economic forecasts, ANZ said it expected moderate
  overall economic growth with gross domestic product (GDP)
  rising 2.7 pct this year and 2.4 pct in 1988.
      The current account deficit would narrow to five pct of GDP
  this year and 4.3 pct in 1988 and net foreign debt would grow
  strongly from 81 billion at the end of 1986 to 97.2 billion at
  end-1987 and 110.3 billion a year later.
      Inflation would fall to 8.5 pct in 1987 and 7.5 pct in 1988
  from 8.9 pct in 1986 and further falls in real wages were
  expected, ANZ said.
  

