ECONOMIC growth has already slowed sharply since December and the threats to the economy are greater than anticipated, according to a frank government assessment.

The Howard Government cites the health of the housing market, a rising Australian dollar, spiralling oil prices and the fragility of the US economy as its biggest worries.

The Government"s latest economic assessment is contained in its submission to the national safety net wage review. It says the 5.7 per cent rise in the minimum wage sought by the ACTU could cause inflation, citing warnings from the Reserve Bank governor Ian Macfarlane that there are already inflationary wage pressures in the pipeline. The assessment also says the growth in business profit has not been nearly as strong as the headline results of corporations might suggest.

John Howard said yesterday the economy was still strong, but admitted it was "slowing a bit".

The commonwealth"s submission provides the first official ； of the economic outlook since December"s mid-year budget review.

On the positive side, employment growth has been stronger than expected three months ago. In the seven months to January, employment has risen at a rate of 2.3 per cent, against a mid-year forecast of 2 per cent.

Unemployment has ；ped to 5.1per cent, against a forecast for the year of 5.5 per cent.

Other welcome developments have been recent contracts for Australian coal and iron ore exports, which should boost export income.

However, overall weak economic growth in September and December has cast a cloud over the mid-year forecast that the economy would grow by 3 per cent this year and 3.25 per cent next year.

The Prime Minister claimed the strength in the employment numbers might not reflect the current state of the economy.

"Employment is often a measurement of where it may have been a few months ago," Mr Howard said.

"You can"t have champagne figures every week, every month, every year, but the underlying strength of the economy is certainly still there."

The government submission said the negative risks to the outlook for both the global and Australian economies had become "more pronounced" since the December budget review. The biggest concern was the housing market. Although a relatively mild decline in housing investment was anticipated, consumer spending would suffer if housing prices fell more sharply.

The Reserve Bank"s recent increase in rates and plunging consumer confidence have brought to the fore concerns expressed in the mid-year forecast. The damage that possible appreciation of the Australian dollar could cause to exporters has also become more immediate since the December forecast, with the value of the Australian dollar rising from about US76c to about US79c. Oil prices, identified as a risk in December, have risen from $US42 ($53) a barrel to $US54 since then.

The Government also echoed the concerns of Treasury secretary Ken Henry that the adjustment of the US dollar, caused by budget and current account deficits, might be a destabilising factor.

The submission to the safety net wage case also included an analysis suggesting that neither the profit share of the economy nor profit growth has been as great as generally believed. National accounts have shown that the profit share of national income has been rising sharply for the past 15 years, but the Government argues that if small, unincorporated businesses are counted, it has barely changed over that period.

What growth in profit there has been has matched rises in incomes and the capital base of business, so the Government argues business does not have an increased capacity to pay wage claims. Although business wage costs have been rising at only 3.3 per cent, it quoted Mr Macfarlane saying that these measures were "backward looking".

Mr Howard said yesterday that wages had been remarkably restrained, given that the economy was close to full employment