NO.012

The Australian economy continues to grow very strongly on low inflation, growing by a

solid 1.0 per cent in the December quarter and 4.3 per cent through

the year. Importantly, the National Accounts indicate that inflationary pressure remains

minimal. The December National Accounts have built further on the Government’s record

of sustained, strong economic growth in a low inflation environment.

The Australian economy has now grown at or above 4 per cent for the last 11 consecutive

quarters – a growth rate unrivalled in the last 30 years.

Strong growth in private consumption over recent quarters reflects growth in household

incomes and wealth and continuing high levels of consumer confidence. While business

investment fell in the December quarter, this component of activity is by nature volatile

from quarter to quarter, and some moderation has been anticipated ahead of tax reform.

Business investment is expected to respond positively in 2000-01 to an improving world

economy and the beneficial impact of the Government’s tax package on business costs.

Net exports contributed to growth in the December quarter, with strong rises in export

volumes more than offsetting a rise in import volumes. This improvement is in line with

the gradual strengthening in the world economy and improvement in the current account

deficit foreshadowed in the Mid-Year Economic and Fiscal Outlook.

The December National Accounts indicate that inflationary pressure remains minimal. The

household consumption deflator fell by 0.1 per cent in the December quarter and

increased by just 0.9 through the year. Average earnings have increased by only

1.6 per cent over the year to the December quarter, reinforcing the evidence

from a range of other measures that wage pressures remain well contained.

The full benefits of recent and future economic reforms, in particular the

Government’s major tax reform, will continue to support economic growth over the next

few years. Australia has weathered the Asian crisis very successfully and the improving

international economic outlook will now lend support to the continuation of economic

growth. The Australian economy has the potential to sustain growth of 3 to 4 per cent

over the early years of this decade.

CANBERRA

15 March 2000