The OECD projects Australias economic growth over the next two years to exceed that of the United States and the European Union and to be well above the OECD average.
The favourable assessment by the OECD follows the strong endorsement of Australias economic management by the IMF, details of which I released yesterday.
The OECD today released its latest economic projections, along with an analysis of recent events in the world economy. These projections will be incorporated in the OECD Economic Outlook 64, which will be published in December.
The OECD projections are broadly consistent with the forecasts contained in the Pre-Election Economic and Fiscal Outlook. The OECD projects that GDP in Australia will grow by 3.5 per cent in 1998, 2.5 per cent in 1999 and 2.7 per cent in 2000, underpinned by low interest rates and a sound budget position. The OECD notes that Australian exporters have been successful in redirecting products to more buoyant markets outside Asia, aided by a boost to competitiveness from the lower exchange rate. The unemployment rate is projected to remain around 8 per cent, and inflation is projected to increase slightly but remain consistent with the RBAs medium-term target range. The current account deficit is projected to fall from 5 per cent of GDP in 1998 to around 5 per cent in 2000.
These projections highlight the fact that the Australian economy is performing strongly compared with other industrial economies, despite the effects of the Asian financial and economic crisis, and the more general global financial turbulence and uncertain economic outlook.
Importantly, the OECD acknowledges the Governments achievement in repairing Commonwealth finances and returning the Budget to surplus. Furthermore, the OECDs fiscal outlook for Australia is broadly consistent with that presented in the PEFO; that is, for further surpluses over the next few years, even after the introduction of the tax reform package.
The OECD notes that most member economies outside the Asian region, other than the Czech Republic and New Zealand, have performed well. However, financial turmoil is expected to result in a slowdown from current rates of economic growth. The OECD now projects GDP growth for the OECD region to slow, from above 3 per cent in 1997 to about 2 in 1998 and then to 1- per cent in 1999, before recovering to around 2 per cent in 2000.
The OECD stressed the need for member countries to refrain from resorting to protectionist measures, noting the importance of OECD markets remaining open to exports of emerging countries affected by the crisis.