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Wednesday, 11 August 1999
Page: 8407


Mr JULL —My question is addressed to the Treasurer. In light of the latest data, does the Treasurer stand by the budget forecast of three per cent growth for 1999-2000, and will the Treasurer inform the House of the outlook for the economy for the next year?


Mr COSTELLO (Treasurer) —I thank the honourable member for Fadden for his question. As honourable members would know, during the year to the end of the March quarter this year the Australian economy grew at 4.8 per cent, one of the highest growth rates of any developed country in the world and the highest growth rate in the Asia-Pacific region. Yesterday, the National Australia Bank monthly survey showed that business conditions strengthened further to reach the highest level since the monthly survey began in 1997. Notwithstanding that, during 1999-2000 we would expect some slowdown on a 4.8 per cent growth rate, more to levels we have seen in the United States—in the threes rather than in the fours. However, we expect that as the world economy picks up there will be a pick-up in the first part of calendar year 2000, that is, the second part of the financial year.

Following the very strong growth in the last two years, the government expects that consumption growth will remain solid in 1999-2000, which will be supported by growing employment, incomes, wealth and low interest rates. We believe that the weak international environment over 1997-98 will have some effect on business investment. Investment is expected to ease somewhat in 1999-2000. This comes after six years of strong growth which has carried business investment as a share of GDP to around historical highs.

The good news for the Australian economy after performing so strongly during such weak world growth—in particular, weak growth in the Asia-Pacific region—is that as growth picks up during 2000 and into 2001 that will give strong impetus to exports. Export growth will contribute to Australian growth during 2000-01. By having an open economy with the capacity to adjust, by having a low inflation rate and a low interest rate, by having a budget in balance, by having a debt reduction strategy, by having improvements in the labour market and by having increased competition in the product market, the Australian economy has managed to remain flexible and withstand probably its biggest external shock since the Second World War, rivalled only by the oil price shocks of the 1970s, something that Australia was unable to withstand at that time. These are the results of strong and good policy promoting a flexible and open economy. While Australia maintains a flexible and open economy together with tax reform we can build an even stronger economy which will take advantage of a pick-up in world prospects in 2000-01 with increasing job opportunities for Australians.

The next review of the government's growth forecasts will be done in the mid-year review. The government puts out only two growth forecasts, one at budget time and one in the mid-year review. I expect that the mid-year review may be brought forward a little this year. We would expect that the mid-year review would be around November, possibly December. The government will not be reviewing its growth forecasts until that time.