NO.019

The Treasurer today rejected suggestions in some newspapers that the

Reserve Bank of Australia had blamed the GST for an economic slowdown.

The Government has always said that there would be one-off transitional

effects from the new tax system changes. In particular, a pull-forward of

housing construction into the first half of 2000, and a consequent steep

decline from a record base in the second half of the year.

Dr Grenville of the Reserve Bank of Australia, in his speech of 23

March 2001, reinforces the observation that apart from the construction

sector (only 5 per cent of the economy), the remaining 95 per cent of the

economy continued to grow at 4 per cent.

The Government also agrees with Reserve Bank that it is possible for an

economy to talk itself into slow growth. An attempt to talk down the

economy can be self-fulfilling if done persistently enough. This of

course, is the tactic of the Labor Party.

The economic fundamentals of the Australian economy are strong – backed

by low inflation, low interest rates and a strong budget position.

Australia can take advantage of tax reform which makes exports more

competitive, adding to the advantage of the super competitive exchange

rate. The new tax system puts in place long term pro-growth structural

changes which were endorsed by the IMF as recently as this week.

MELBOURNE

24 March 2001