Briefing Notes for the Launch in Canberra, April 2007
Australia's economic performance – briefing from the Survey
- The economy grew by 2.5% in 2006, marking 16 years of expansion. Domestic demand was the main driver of growth.
- Domestic demand growth was supported by strong business investment.
- Asian countries have become increasingly important trade partners. For instance, exports to China increased by 22% a year in 2000-2005, while exports to India expanded by almost 30% in 5 years during the period 2001-2005.
- The current account deficit has improved from 6.0% of GDP in 2005 to 5.7% in 2006.
- Inflationary pressure was building up in Australia, due to higher commodity prices and tightening capacity. The inflation rate was 3.6% in 2006, compared to 2.7% in 2005. Consumer price inflation was contained, although high prices of oil and fruits pushed up the consumer price index.
- With strong domestic demand, economic growth is expected to continue in coming years. The rate of GDP growth in 2007 is expected to be 3.0%.
Background information on economic performance (Not in the survey)
- Improved terms of trade and strong business investment contributed to GDP growth.
- Private investment growth was supported by continued strength of business investment due to high capacity utilization and high corporate profits, while residential investment fell.
- Household consumption was moderate. The impact of higher petrol prices and the cooling of the housing market reduced the wealth of households, but these effects were somewhat offset by increased employment.
- Asian countries' importance as trading partners increased; e.g.,
- Annual export growth on average
- to Asia: 5.9% (2000-2005)
- to China: 22.5% (2000-2005)
- to India: 28.8% (2001-2005)
- China has become the second largest export partner for Australia
- The share of imports from Asia increased from 44% in 2000 to 49% in 2005
- The international environment was favourable for Australian exporters. With high world commodity prices, Australia's terms of trade recorded their highest level since the 1950s. Capacity constraints for (mining) production muted export growth.
- With buoyant business investment, import demand for capital goods strongly increased.
- The inflation rate approached the upper limit of the Reserve Bank of Australia's (RBA) policy target. The overnight cash rate (OCR) was raised in May 2006 for the first time since March 2005. Subsequent increases of OCR also reflected the RBA's concerns over the tightening labour market. However, further tightening of monetary policy would pose a risk to economic growth.
- The budget balance in Australia has been in surplus since 1997. It recorded a surplus of 2.2% of GDP in 2006, allowing expansionary fiscal policy such as a programme to help drought afflicted farmers.
Special chapter on Gender
- Australia is free from many of the urgent issues discussed in the chapter such as access to education and access to healthcare. Australia is ranked among the top 25 in the gender gap index.
- Economic participation of women is also among the highest.
- The proportion of women in parliament is among the highest, although the rate alone does not necessarily indicate women are politically empowered, as suggested by the evidence from South Asia.