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Australian economy continues to expand in spite of crisis in Asia



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A U S T R A L I A N C H A M B E R O F C O M M E R C E A N D I N D U S T R Y

MEDIA RELEASE M ay be reported on: Monday, 25 May 1998 I f j c u J r CiLuuJ>-<^ 0$ t- m L -J -ยท

Australian Economy Continues to Expand e In Spite of Crisis in Asia i^JCuuuSb^

Statement by Mark Paterson, Chief Executive on the Release of the April 1998 ACC I Survey of Investor Confidence

That the Asian economic crisis has taken some of the momentum from the Australian economy should surprise no one. The crucial question now is how large will the effect of Asia be on Australia.

The most important result of this survey is that it demonstrates that business confidence remains strong even with the Asian crisis deeply affecting so many of our trading partners.

Both in terms of the national economy and in respect of their own firms, respondents indicated that conditions are expected to remain almost unchanged.

Some of the momentum has disappeared. But overall, conditions are expected to remain little different than in the previous quarter, and are substantially better in comparison with one year before.

The survey shows that respondents generally expect a mild slowdown in GDP growth and have already experienced a mild slowdown in their own level of activity. There is no indication at this stage of any major fall off in the level of economic activity here in Australia.

The general expectation is that the economy will continue to expand at rates below its rate of growth over the past twelve months. Respondents similarly expect sales within their own firms to continue at virtually the same rate as during the past year.

These results provide strong support for the forecasts found in the budget with which we agreed.

Although the expected growth rate is too slow to make major inroads into unemployment, it is nevertheless also a pace at which the number of persons unemployed should not rise dramatically.

In regard to employment, the survey also shows a continuation of the trend towards finding it more difficult to find employees with the appropriate skills.

This itself suggests that the labour market is tightening, but should also add concerns about the future direction of wages. AS the survey shows, both wages and non-wage labour costs remain important constraints on investment.

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Business taxes and government charges are the largest constraint on business investment, as they have been for the past six years. The importance of tax reform is highlighted by this figure.

Getting both the level and form of taxation right will have a crucial effect on investment, employment and the Australian standard of living.

For further comment, please contact: Mr Mark Paterson Chief Executive 02 6273 2311 (B/H) 016 280 664 (pager)

Dr Steven Kates 02 6273 2311 (B/H) Chief Economist 02 6295 0827 (A/H)

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L E A D I N G A U S T R A L I A N B U S I N E S S