OECD Gives Australia Upbeat Report

OECD Gives Australia Upbeat Report On Economic Record

The OECD’s latest Economic Outlook provides a glowing assessment of the Australian economy with an expected continuation of strong economic growth over the next two years.

Announcing details of the assessment, the Australian Treasurer, Peter Costello, said that the OECD forecasts the Australian economy to grow by 3.6 per cent in 2004, in line with the OECD average. This follows three consecutive years where Australia’s annual economic growth has exceeded that of the OECD area.

Australia’s growth would increase by 3.8 per cent in 2005 and 3.6 per cent in 2006, stronger than the OECD average.

The forecasts for Australia incorporate some rebalancing of growth as improving net exports offset a projected weakening in household consumption and residential investment.

Strong economic growth was expected to be accompanied by further employment gains with forecasts that the unemployment rate would stay around 5.5 per cent.

Australia’s inflation levels were expected to remain within the 2 to 3 per cent medium-term target band. The projected fiscal surpluses for the consolidated general government sector over coming years are described as ‘cyclically prudent’.

Mr Costello said that the OECD’s assessment mentioned some risks to the outlook, such as disappointing rainfall and rising oil prices. The possibility of an abrupt fall in house prices was also mentioned as a risk, although the OECD assesses that the probability of this occurring would remain low.

The OECD stated that the global economic expansion was projected to continue over the next two years, albeit at a more moderate pace as the sharp increases in oil prices affect growth.

The OECD has revised up its forecasts for OECD area GDP growth in 2004 from 3.4 per cent to 3.6 per cent, while growth in 2005 has been revised down from 3.3 per cent to 2.9 per cent. The OECD is projecting GDP growth across the OECD area of 3.1 per cent in 2006.

CANBERRA 30 November 2004

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