NO.077

The OECD expects the recent strength of the Australian economy to continue in 1999,

followed by a moderation in growth in 2000.

GDP growth in Australia is expected to grow by 3.9 per cent in 1999 and

3.0 per cent in 2000, mainly reflecting weaker private business investment.

Growth is then expected to accelerate to 4.0 per cent in 2001 as business

investment strengthens. Continued favourable economic growth is projected to allow further

falls in the unemployment rate, reaching 6 per cent in 2001.

The OECD projection is for inflation to pick up to 4 per cent in 2000 including a 2 per

cent contribution from tax reforms. (The Government is projecting a contribution of 2-

per cent through the year to June 2001 and a financial year preliminary forecast of 5

per cent.) Abstracting from the one-off impact of the GST, the OECD expects inflation to

return to the middle of the Reserve Bank’s 2 to 3 per cent medium-term

target range in 2001. The current account deficit is projected to fall from

5.7 per cent of GDP in 1999 to 4.9 per cent in 2000 and

4.3 per cent in 2001.

Along with the economic projections for Australia, the OECD released an analysis of

recent events in the world economy. The projections will be incorporated into the OECD

Economic Outlook 66, which will be published in December.

In terms of the global outlook, the OECD notes that “the outlook for world and

OECD-wide growth has improved substantially over the past few months.” After growing

by 2.4 per cent in 1998, the OECD expects output growth in the OECD area to have

rebounded to around 3 per cent in 1999 and 2000, before easing slightly to

around 2 per cent growth in 2001. These forecasts represent a cumulative upward revision

of around 1 percentage points for the years 1999 and 2000, compared to the OECD

projections published in May in OECD Economic Outlook 65.

CANBERRA

16 November 1999