In its latest Economic Outlook, the OECD is forecasting economic growth in Australia of a solid 3.2 per cent for 2002. This is significantly higher than the economic growth forecasts for any of the G7 countries and is well above the OECD average.
The OECD's assessment of the outlook for the Australian economy is consistent with the forecasts contained in the Government's Mid-Year Economic and Fiscal Outlook released in October. Despite the global slowdown, the OECD says that Australian economic growth is projected to strengthen further, helped by low interest rates, a very competitive exchange rate and sound household and business financial conditions.
The OECD's economic growth forecast for Australia in 2002 is based on solid growth in private and government consumption, with inflation remaining in the 2 to 3 per cent target range. The OECD expects the unemployment rate to resume a moderate downward trend over 2002.
During 2003, the OECD has forecast an increase in Australian economic growth to 4 per cent, on the back of strong growth in domestic demand and an improvement in the world economy.
The OECD outlines a sombre outlook for global economic activity. It notes that the world economy was weak and slowing moving into the second half of 2001, but has weakened further as confidence has fallen and uncertainty has increased in the aftermath of the events of September 11. The United States and Japan are probably in recession and growth is subdued in other regions. In the immediate future, OECD area growth is expected to be at levels not seen since the early 1980s. Output growth is expected to pick up from mid 2002, but there are substantial uncertainties surrounding the world economic outlook.
The OECD notes that "With the economy's adjustment to GST now largely completed, and generally favourable conditions for domestic demand, economic growth is expected to remain firm." It goes on to say that while a sharper than expected global downturn is the main risk to the outlook, Australia has "sound aggregate profitability, improved financing conditions and a competitive exchange rate". With strong economic fundamentals, along with enhanced resilience from recent structural reforms, the OECD indicates that Australia is well equipped to continue growing during this period of global economic downturn.
20 November 2001
Contact: Richard Wise Assistant Treasurer's Office (02) 6277 7360