australian budget analysis
per cent in year-average terms and 1½ per cent through-the-year to the June quarter of 2004. The expected moderation in employment growth is likely to see the unemployment rate remain around 6 per cent over the next year.
The expected slowdown in employment growth comes after very strong growth in the first half of 2002-03. Much of the strength appears to have been concentrated in retail and housing-related employment.
Labour market leading indicators and business surveys of hiring intentions are broadly consistent with an expected slowing in the labour market. The ANZ newspaper job vacancy series, for example, is now showing a declining trend, although the ABS measure of vacancies is still rising. The labour-intensive residential construction sector and construction-related parts of the manufacturing sector are expected to slow from around mid-2003. This is expected to provide more impetus to a generalised slowing in employment growth. The expected gradual recovery in rural and regional employment should provide a partial offset.
Unemployment rate
Source: ABS Cat. No. 6202.0 and Treasury.
Inflation
The one-off impact of the GST on the CPI inflation indicator has taken the headline inflation rate to 6% in the current year, whereas the Government is projecting a 2% outcome in CPI for the year ahead. This falls well within the acceptable boundaries that are used by the Reserve Bank in assessing the need for direct monetary intervention.
The Australian Consumer Price Index (CPI) increased by 3.1 percent through the year to the December quarter 2002. Various one-off factors added to inflation over that period. The price of meat, seafood, fruit and vegetables increased substantially through the year. In addition, some price effects have resulted from the events of September 11, the collapse of a major Australian insurance firm (HIH) and the second largest Australian airline (Ansett). These upwards price movements were offset somewhat by a significant decline in petrol prices over the year due to a fall in global oil prices.
Conclusion
According to the 2003-04 Australian Federal Budget information data, its impacts on Australia’s economic growth, unemployment and inflation are tremendous. Exports imports are projected to continue to grow at levels similar to those in the current year while the improved domestic economic conditions are projected to grow. Nevertheless, despite a continuing softness in the employment market, the Government is continuing to predict growth in some industries, such as household consumption. Whereas the Government is projecting a 2% outcome in CPI for the year ahead, the one-off impact of the GST on the CPI inflation indicator has taken the headline inflation rate to 6% in the current year.
Reference
The commonwealth budget-overview 2003-2004 http://www.budget.gov.au/2003-04/overview/html/overview.htm accessed by 10/09/2003
Federal Budget 2001 - detailed analysis http://www. Australian Federal Budget 2001 - detailed analysis TLS.htm accessed by 10/09/2003
Federal Budget outcome 2003-04, AGPS, Canberra, 2003 http://www.treasury.gov.au accessed by 10/09/2003
Sloman, J. and Norris, K., 2002, Macroeconomics, 2nd edition, Pearson Education, Sydney
Waud, R., and Maxwell, P., 1996, Ecinomics, Longman, Melbourne