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Wednesday, 15 June 2005
Page: 74

Mr JOHNSON (2:37 PM) —My question is to the Treasurer. Would the Treasurer outline to the people of Ryan recent data on consumer sentiment. What does this information indicate about the outlook for the Australian economy?

Mr COSTELLO (Treasurer) —I thank the honourable member for Ryan for his question. I can outline to the people of Ryan that information about consumer sentiment as measured by Westpac and the Melbourne Institute was released today. Although it showed that consumer sentiment had fallen by a slight amount, 0.5 per cent, this was following a 9.5 per cent surge in May in response to the budget. Consumer sentiment is still up by nine per cent on where it was at budget time. Sentiment concerning the current state of family finances in the 12-month outlook rose. No doubt that reflects the anticipation of tax cuts which will be implemented in Australia on 1 July.

The economy has moderated somewhat since last year. Rather than looking at an economy with four per cent growth, as we got used to, it is more likely that we will look at an Australian economy going down to be in the three per cent band. As I have said on numbers of occasions, this is not unwelcome. We have been looking for a moderation in the housing cycle for some time. It also looks as if we are now seeing a moderation in relation to consumption.

The Reserve Bank governor, in a speech yesterday, said that he viewed the recent moderation in growth as more likely to prolong the economic expansion than to end it. That is certainly my sentiment. If consumption moderates and the housing cycle moderates, and we get some more sustainable growth in relation to those things, the duration of this current economic expansion should be prolonged.

Notwithstanding that, labour market conditions are the best they have been for 29 years, with unemployment at 5.1 per cent. Our participation rate is at an all-time high. And over the last year 330,000 jobs were created in the Australian economy, with almost 70 per cent of them being full-time.

This does not mean that the government should rest in relation to economic reform. It means that the government should continue and should engage in new areas of economic reform. Let me name labour market reform as the most important micro reform for the Australian economy. If we can put in place real, vibrant labour market reform, this will set Australia up in structural terms for a much more prosperous future, for more jobs and higher wages.