Australian Economic Performance in Perspective

The Australian economy is the 13th largest in the world: the US economy, the largest. The Australian and the US economy have much in common in terms of a vibrant economic performance and policy strengths.

Australia is now a high growth, low inflation, low interest rate economy in which a small, efficient government sector, continuous structural reforms and more flexible businesses and labour markets drive high productivity performance and falling unemployment.

• Over the decade, Australian economic growth outstripped US growth by an average of about 0.7 percent per annum.
• Over this decade so far, inflation has averaged 2.2 percent in Australia and 2.9 percent in the US
• Australia is now also, like the US, a low interest rate economy
• Australian public debt levels have been heavily reduced, and are now only about one-third of the US level. Australia's general government net-debt-to-GDP ratio will fall to under 11 percent of GDP by the end of this fiscal year.
• Australian labour productivity growth has jumped markedly, and is now higher than the US.
• Both US and Australian labour markets are performing at record rates of employment growth.
• And as a final suggestion of major changes in attitudes and in the way Australians view their economic opportunities, there are now more Australian share-owners than trade unionists.

Looking to the period immediately ahead, the full benefits of recent and future reforms should continue to support economic growth over the next few years. Following a period of very strong growth, output is likely to moderate in 1999-2000 towards a 3 percent outlook.

Significantly, the moderation in growth is expected over the course of 1999, reflecting the impact on our exports and business investment of continued below trend growth in the world economy. Business investment will, however, remain at historically high levels, continuing to underpin the improved longer-term growth potential of the economy.

As exports and commodity prices respond to gradual strengthening in world growth, I anticipate that the current account deficit is likely to ease in 1999-2000, to 5.25 percent of GDP.

Employment growth will remain strong and we will keep intact the very significant gains Australia has made in reducing the unemployment rate. Inflation will stay low, increasing to a little over 2 percent during the first half of 2000 - that is near the bottom of the 2 to 3 percent inflation target range.

A key ingredient in Australia's recent economic performance has been a sound fiscal policy.

When we came to Government in 1996, the federal government had an underlying budget deficit of 2 per cent of GDP, which we turned around into a surplus two years later.

For the current year, we are forecasting a surplus of just under 1 per cent of GDP. This will be our third surplus in a row and we are projecting surpluses over the following three years.

We have committed ourselves to ongoing fiscal probity through a medium-term strategy directed at achieving fiscal balance, on average, over the economic cycle. This commitment is complemented by a legislated Charter of Budget Honesty that binds governments to high levels of fiscal transparency and accountability. Our Charter of Budget Honesty is regarded by the IMF as international best practice.

Our programme of fiscal consolidation, together with privatisations, will reduce Australia's debt-to-GDP to less than 11 percent of GDP by the end of this fiscal year.