The Australian economy has been a very strong performer in recent years— indeed, one of the strongest performing developed economies in the world. Over the past eightyears, Australia has averaged GDP growth of 3.6percent a year and inflation of 2.4percent. Over that time, the unemployment rate has fallen from 8.2 to 5.7percent. At times during the 1990s, it was difficult to believe that we would ever again see an unemployment rate with a five in front of it.
And we have achieved these numbers in difficult circumstances. In 1997 and 1998 we were hit by the Asian financial and economic crisis. In 2001 and 2002 we withstood a US recession and a synchronised downturn in the world’s major economies, the effects of which are still being felt. There was September 11, SARS and war in Iraq. In 2002 we endured the dreadful effects of a once-in-a-century drought which still lingers in some areas.
In the year ahead, the outlook is for solid economic growth to continue. Our most recent forecasts, released just before Christmas, were for the economy to grow by 3percent in 2003-04, with low inflation and solid employment growth. We will review these forecasts in the May Budget, but at this stage the outlook remains promising, with both consumer and business sentiment holding at high levels.
Of course, as I have said previously, the risks around the outlook are somewhat greater at the moment than they have been in a number of years. The exchange rate has appreciated very quickly over the past year and that is putting pressure on the incomes of exporters and import-competing industries. The recovery in the international economy remains reliant on the United States— growth in Europe in particular remains very sluggish— but we are seeing stronger growth in EastAsia. And while strong growth is likely to continue, it is difficult at this stage to determine what will be the impact of the Avian flu on EastAsian economies.
Through all these difficulties, the Government has remained focused on the economic fundamentals— healthy competition, tax reform, prudent fiscal policy, labour market reform, and low inflation. This performance has been recognised internationally. The OECD hassaid thatour"pursuit of structural reforms across a broad front, and prudent macro economic policiesset in a medium term framework, have combined to make the Australian economy one of the best performers in the OECD, and also onenotably resilient to shocks, both internal and external."
Our recent record of economic reform means that in comparison with other countries, which have even larger problems, Australia is among the countries best placed to deal with an ageing population.