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US economy is no ‘locomotive’

The idea that the US is driving the global economy is “laughable”, according to a global investment management firm.

Speaking at an adviser roadshow in Sydney last week, Scott Berg, portfolio manager at T. Rowe Price Global Equity Fund, said GDP growth in the US has sat at 2 per cent every year for the past five years.

“Every year the [US Federal Reserve] thought [economic growth] would be 3 per cent, and it was 2 per cent,” Mr Berg said.

“I find it laughable when I travel around [the world] and I read a newspaper that says ‘the US is driving the global economy’,” he said.

Upon returning to the US after visiting Australia in January this year, the Canberra-born fund manager conducted a straw poll of his US-based colleagues.

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“‘What do you think Australian GDP grew at in 2015?’, I asked them. Seventy per cent of people’s answers were -0.5 per cent or -1.0 per cent, given commodities are down and Australia ‘must be in a recession’,” Mr Berg said.

In fact, Australia’s economy is growing 50 per cent faster than that of the US, he said.

“But the US is driving the global economy? And the US is the locomotive? And Australia, a country people think is in recession, grew 50 per cent faster than we did,” Mr Berg said.

“America’s 2 per cent growth only looks good because Japan’s zero and Europe’s 0.5 [per cent]. That’s why [there’s the perception] America is growing the world economy, but it’s not happening in an absolute sense.”

[Related: US Fed ‘edging’ towards a rate rise, says AMP]

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