The Australian economy continues to grow very strongly on low inflation, growing by a solid 1.0 per cent in the December quarter and 4.3 per cent through the year. Importantly, the National Accounts indicate that inflationary pressure remains minimal. The December National Accounts have built further on the Governments record of sustained, strong economic growth in a low inflation environment.
The Australian economy has now grown at or above 4 per cent for the last 11 consecutive quarters a growth rate unrivalled in the last 30 years.
Strong growth in private consumption over recent quarters reflects growth in household incomes and wealth and continuing high levels of consumer confidence. While business investment fell in the December quarter, this component of activity is by nature volatile from quarter to quarter, and some moderation has been anticipated ahead of tax reform. Business investment is expected to respond positively in 2000-01 to an improving world economy and the beneficial impact of the Governments tax package on business costs.
Net exports contributed to growth in the December quarter, with strong rises in export volumes more than offsetting a rise in import volumes. This improvement is in line with the gradual strengthening in the world economy and improvement in the current account deficit foreshadowed in the Mid-Year Economic and Fiscal Outlook.
The December National Accounts indicate that inflationary pressure remains minimal. The household consumption deflator fell by 0.1 per cent in the December quarter and increased by just 0.9 through the year. Average earnings have increased by only 1.6 per cent over the year to the December quarter, reinforcing the evidence from a range of other measures that wage pressures remain well contained.
The full benefits of recent and future economic reforms, in particular the Governments major tax reform, will continue to support economic growth over the next few years. Australia has weathered the Asian crisis very successfully and the improving international economic outlook will now lend support to the continuation of economic growth. The Australian economy has the potential to sustain growth of 3 to 4 per cent over the early years of this decade.