NO.053

Following a sustained period of very strong growth to the March quarter 1999, GDP

growth in the June quarter moderated to 0.2 per cent.

Year-average growth in 1998-99 was a very strong 4.5 per cent, a little above the

May Budget forecast of 4 per cent and similar to the 4.8 per cent growth outcome in

1997-98. The moderation in growth in the June quarter is consistent with the outlook in

the Budget, easing from the four plus per cent growth experienced in 1997-98 and 1998-99,

to 3 per cent growth in 1999-2000.

In the face of the Asian financial crisis and much slower world growth, the June

quarter growth outcome of 4.1 per cent through the year represented the ninth

consecutive quarter in which growth has exceeded 4 per cent in through-the-year terms.

This is the longest, sustained period of GDP growth of 4 per cent or better since the

early 1970s.

Australia’s economic growth and low inflation outcomes remain favourable by

international comparisons.

Domestic demand has grown over the past two quarters, with flat growth in the June

quarter following a 2.1 per cent jump in the March quarter. Domestic demand will continue

to be supported by strong employment growth, high productivity, healthy corporate

profitability, historically low interest rates and low inflation outcomes.

Net exports detracted from growth in the June quarter, reflecting steady export volumes

and higher domestic import volumes arising from strong domestic demand through the year.

Sluggish export volumes and a fall in export prices in the quarter highlights the

difficult world trading conditions for our exporters, particularly in East Asia despite

recent signs of a turnaround in most markets. The international environment is expected to

improve as 1999-2000 proceeds.

The National Accounts provide ongoing evidence of subdued price pressures, with the

household consumption deflator rising by only 0.1 per cent in the June quarter and by 1.1

per cent through the year. This is broadly in line with the movements in the Consumer

Price Index.

The Government has forecast growth slowing through 1999 and picking up through 2000 as

the world economy picks up. Commencing in July 2000, The New Tax System will

contribute further towards raising the economy’s growth potential through more

efficient resource allocation and by providing improved incentives to work, save and

invest.

CANBERRA

1 September 1999