The 1998 Survey of Australia was released by the OECD today.
The Survey provides a very favourable assessment of the performance of the economy throughout 1998 and highlights the impressive resilience of the Australian economy during the current downturn in the region. It emphasises that the Australian economy has coped well with the Asian crisis so far, despite its larger trade exposure to that region than most other OECD countries.
The Survey contains a strong endorsement of the Government's macroeconomic and structural policies and notes the importance of the Government's policy settings in placing Australia in such an excellent position to cope with the financial crisis in Asia.
The OECD welcomes the comprehensive reforms contained in the Government's tax reform package and urges its full and rapid implementation. The OECD sees full and rapid implementation of the package as vital in achieving a substantial improvement in economic performance in Australia and the longer term security of the revenue base.
With respect to the outlook for the Australian economy, the economic projections presented are identical to those released by the OECD in late November. That is, economic growth is expected to slow, with downside risks stemming from the external environment. While the OECD projects a widening in the current account deficit in 1998, the Survey notes that "this deterioration should not be seen as a cause for concern in the current economic environment, so long as it is progressively reversed in the coming years".
The OECD is supportive of the current monetary policy stance and considers that it is appropriate at the current juncture. The OECD also endorses the Government's approach to keeping fiscal policy geared towards continuing the gains in budget consolidation, while acknowledging that if any slowdown in economic growth were to occur it would be appropriate for the automatic stabilisers to work to reduce the budget surplus.
The OECD highlights the efficiency gains resulting from the financial system reforms and the Corporate Law Economic Reform Program being implemented by this Government. Once again, the OECD notes the benefits (in terms of ongoing strong economic growth in Australia) that could result from quicker progress in moving towards an industrial relations system focused on enterprise bargaining.
The "special topic" in this year's Survey is 'Coping with Population Ageing'. The Survey notes that although population ageing will place a strain on government budgets, Australia is much better placed than most other OECD countries in this regard. The Survey endorses the Government's response to the long-term threat to pension outlays and recommends additional measures to limit 'double-dipping' as well as measures to reduce early retirement. It also notes that reforms aimed at reducing early retirement by improving labour market opportunities and discouraging premature take-up of social security benefits would make a valuable contribution in this regard. The OECD argues that measures to contain the rise in public health-care expenditures need to be examined and in particular that recent reforms be evaluated to assess their effectiveness.
The Government welcomes the 1998 OECD Survey of Australia and the opportunity it provides for debate on Australia's economic and policy credentials.