The OECD has revised up its growth projections for the Australian economy estimating

solid growth of 3.9 per cent in 2000, and 3.7 per cent in 2001.

Given the projected robust growth, the unemployment rate is expected to decline further

to 6.4 per cent by 2001, with the OECD highlighting the need for further structural

progress to “enhance the cyclical responsiveness of the labour market.”

The OECD also states that the increase in the CPI due to the introduction of the GST is

“not expected to become embedded into core inflation.”

Exports are “likely to be a major engine of growth” in Australia, given an

improving global outlook, with Australia’s current account deficit to fall to

4.8 per cent of GDP in 2000, having peaked at 5.7 per cent in 1999. A

further fall in the current account deficit to 4.1 per cent is expected by the OECD in

2001.

The OECD estimates that the Australian Budget will be in structural surplus in 2000 and

2001, and that it has been in structural surplus since 1998.

In discussing the global outlook, the OECD notes that “The world economy continues

to rebound strongly from the 1997-98 slowdown associated with the crisis in emerging

market economies and is developing more favourably than it has for more than a

decade.” After growing by 3 per cent in 1999, the OECD expects output growth in the

OECD area to be 4 per cent in 2000, the fastest pace in more than a decade, before slowing

to 3.1 per cent in 2001.

CANBERRA

30 May 2000