NO.049

OECD PRESENTS A FAVOURABLE OUTLOOK FOR THE AUSTRALIAN ECONOMY

The OECD’s latest Economic Outlook forecasts that economic growth in Australia will strengthen in 2006 and 2007. The OECD expects that the strong performance of the Australian labour market will be sustained, with the unemployment rate remaining well below the current OECD average of 6.5 per cent.

The OECD forecasts Australia’s real GDP to grow by 2.9 per cent in 2006, before picking up to 3.7 per cent in 2007. Continued strength in business investment and buoyant exports are expected to contribute to growth. In line with strengthening exports, the OECD expects that the current account deficit will improve.

Reflecting high energy prices, the OECD predicts that inflation will peak at around 3.0 per cent in 2006, before easing in 2007 to around the mid-point of the RBA’s inflation band.

The Economic Outlook notes that the growth prospects for the OECD are well-balanced in the near term, given strong corporate profits and supportive financial market conditions.  After growing by 2.8 per cent in 2005, growth across the OECD area is projected to increase to 3.1 per cent in 2006 and to ease slightly to 2.9 per cent in 2007.  The positive outlook is supported by an expected pick-up in activity in the Euro area, while the US and Japan are expected remain strong in 2006 before easing slightly from recent above trend rates of growth.

23 May 2006

Contact: David Alexander

(02) 6277 7340