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Australia's economic forecast looks much brighter.



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MARK COLVIN: Important as an issue or not, at the end of day one of the election campaign, the Australian economy is suddenly looking better.  The Treasurer had been planning to issue revised economic forecasts this Wednesday amid an all but certain expectation that he’d mark them down, but there’s now a growing sense that he may not need to.  This analysis from Peter Martin.

 

PETER MARTIN: Picture this:  unemployment down to 7.75 per cent by mid-next year;  jobs growth of 1.75 per cent;  the all-important rate of economic growth on which it all depends - 3 per cent year on year.  Those were the forecasts made back in easier times in Peter Costello’s budget in May.  Since then, the Australian dollar has collapsed, the Russian economy has collapsed and worldwide commodity prices have collapsed.  As recently as last week, the majority of surveyed economists were of the view that Australia’s rate of economic growth would actually turn negative in the figures for the three months to June due for release this Wednesday - the technical precursor to a technical recession.

 

Well, they’ve since changed their minds.  What’s done it has been very good news on company profits in the last week, a better than expected balance of payments - that news came on Friday - and today, news of another very big rise in the stocks of goods held by businesses at a time when those stocks were expected to drop.  They all feed into the economic growth number to be released this Wednesday and, as a result of those changes, the same experts who were predicting that number would be negative are now expecting it to be strongly positive, up perhaps three-quarters of one per cent in the quarter, giving an annual economic growth rate of more than 3 per cent to date.  They’re divided over whether it will last but the important point for Peter Costello and the Federal Treasury is that it won’t need to.  A forecast of 3 per cent economic growth for the year ahead is now credible.  As a result, a forecast rate of unemployment below 8 per cent by financial year’s end remains just a fireball.

 

The first of the economic cards to be dealt during the election have fallen the Government’s way.  The Australian dollar may be under siege, the prices for some of the things we sell may be collapsing, but the Government should be able to make a case and a case will be all that’s needed on Wednesday, but thanks to its superior economic management, all that hasn’t affected us much, yet, and won’t for the year ahead.

 

MARK COLVIN: Peter Martin.