FED: Aust economy the solid rock of Asia: Costello

AAP General News (Australia)
12-17-1998
FED: Aust economy the solid rock of Asia: Costello

By Liz Rudall, Economics Correspondent

CANBERRA, Dec 17 AAP - Australia's economy had stood rock-solid during the Asian financial
fury and outperformed the rest of the world, Treasurer Peter Costello said today.

The 1998/99 mid-year economic and fiscal outlook boosted official forecasts for economic
growth, jobs growth and the budget surplus while pointing to lower inflation and steady
unemployment in the current financial year.

The document suggests the full impact of the Asian crisis will hit Australia's economic
growth in 1999 before a recovery in the new millennium.

"In the face of the Asian financial fury Australia has been a rock of economic stability
and growth," Mr Costello told reporters.

"It puts us back in the winners circle as we face the forthcoming year.

"The Australian economy has outperformed the region and the world."

But the treasurer dampened hopes of a further cut in official interest rates, saying the
Reserve Bank would be mindful of the widening current account deficit, expected to blow out to
$32 billion - or 5.5 per cent of GDP - in 1998/99.

"That will be something that will be weighing on the bank's mind as it's weighing on my
mind when looking at monetary policy," he said.

The mid-year review increased economic growth forecasts for 1998/99 to 3.25 per cent from
2.75 per cent forecast before the election.

Ironically, this had been revised down from three per cent in the budget papers due to
fears of falling business investment and domestic confidence.

But Mr Costello denied the government was spooked.

He said economic growth was expected to reach a year average of 2.75 per cent in 1999/00 -
with most of the weakness evident in 1999.

Mr Costello said growth was seen strengthening through the fiscal year, reaching an annual
rate of 3.5 per cent over the year to June 2000.

Jobs growth for 1998/99 was seen slightly stronger at two per cent, although this was not
expected to impact on the the unemployment rate due to an expected slowing in domestic demand.

Employment growth was expected to slide to 1.25 per cent in 1999/00.

Mr Costello said the falling exchange rate this year, combined with the ability of
exporters to diversify, helped the economy withstand the crisis.

But he said he expected business investment and economic growth to slow next year before
recovering in 2000.

"I think we would all agree there is going to be a strengthening sometime in the new
century, or the new millennium," he said.

Meanwhile, the opposition raised concerns with a $2.3 billion erosion from the budget
surplus in the three outyears.

The underlying surplus was expected to come in $580 million better at $3.27 billion in
1998/99.

But it was forecast at $2.61 billion in 1999/00 compared with $4.73 billion in the budget,
$3.42 billion in 2000/01 compared with $8.61 billion, and $9.42 billion in 2001/02 compared
with $14.59 billion.

However, Labor took credit for signs of economic strength, saying they arose from
fundamentals put in place by former Labor governments.

"The Labor government from 1983 to 1996 could walk on any stage and take a collective bow
for turning this into the strongest economy in the world - so strong in fact that even this
government couldn't muck it up in a hurry," Opposition treasury spokesman Simon Crean said.

AAP ear/it/de

KEYWORD: ECONOMY NIGHTLEAD

1998 AAP Information Services Pty Limited (AAP) or its Licensors.