Country Forecast Australia July 2011 Updater - a new market research

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Australia at a glance: 2011-15
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OVERVIEW

The Labor Party government is struggling to push its policy agenda through parliament. Its weakness is a result of the general

 

election in August 2010, which produced a hung parliament. Labor managed to form a government with a wafer-thin majority, thanks to the support of independents and the Greens, but it remains vulnerable to sickness and desertions. Real GDP is set to slow marginally in 2011, to 2.4%, owing to the recent widespread flooding in Queensland and Victoria, from 2.7% in 2010. But in 2012 growth will  accelerate to 3.5% as exports recover and the bulk of reconstruction work takes place. It will then average 3.4% a year in 2013-15. The budget is expected to remain in deficit in fiscal year 2010/11 (July-June), but the government will achieve its goal of eliminating the deficit in 2012/13. Inflation is expected to be rapid by historical standards in 2011-12, owing to high global prices for food and fuel, but the Economist Intelligence Unit forecasts that pressure will diminish from 2013 onwards, to average 2.5% a year in 2013-15.

Key changes from last month

Political outlook

The opposition Liberal-National coalition has so far failed to capitalise on a difficult period for the government. Opinion polls have showed a public preference for the coalition over Labor for most of the current parliamentary term, but the coalition leader, Tony Abbott, has lagged behind the current prime minister, Julia Gillard, as the electorate's preferred leader.

Economic policy outlook

Despite the expected flood-induced slowdown in economic growth in the first half of 2011 and the concurrent strength of the Australian dollar, we expect the Reserve Bank of Australia (the central bank) to raise its policy interest rate to 5% in August or September.

Economic forecast

With the exception of the export sector, which has been affected by the flooding, the economy is in a position of relative strength, buoyed by a mining boom that has sent the terms of trade soaring to its highest level in 150 years. We expect economic growth to average 3.4% a year in 2012-15.
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Country forecast overview: Highlights

Country forecast overview: Key indicators

Country forecast overview: Business environment rankings

Country forecast overview: Australia's business environment at a glance

Policy towards private enterprise and competition

Policy towards foreign investment

Foreign trade and exchange controls

Taxes

Financing

The labour market

Infrastructure

Fact sheet

Outlook for 2011-15: Political stability

Outlook for 2011-15: Election watch

Outlook for 2011-15: International relations

Outlook for 2011-15: Policy trends

Outlook for 2011-15: Fiscal policy

Outlook for 2011-15: Monetary policy

Outlook for 2011-15: Economic growth

Outlook for 2011-15: Inflation

Outlook for 2011-15: Exchange rates

Outlook for 2011-15: External sector

Data summary: Global outlook

Data summary: Gross domestic product, current market prices

Data summary: Gross domestic product, at constant prices

Data summary: Gross domestic product by sector of origin

Data summary: Growth and productivity

Data summary: Economic structure, income and market size

Data summary: Fiscal indicators

Data summary: Monetary indicators

Data summary: Employment, wages and prices

Data summary: Current account and terms of trade

Data summary: Foreign direct investment

Data summary: External debt

Data sources and definitions

Global data

Domestic data

Abbreviations