Look on the Bright Side

The Australian
18th October 2004

Is Treasurer Peter Costello correct in asserting that Treasury is pretty optimistic in forecasting "uninterrupted growth for the next four years" averaging 3.5 percent per annum?

Mr Costello should be reminded of some salient aspects of the Treasury figures and Australia's growth performance. First, the figures showing growth of 3.5 percent in 2006-07 and 2007-08 are not forecasts but projections based on the trend rate of growth in recent years. Second, despite an Asian crisis and a US recession Australia has now experienced a dozen or so years in which growth has averaged over 3.5 percent per annum and has fallen below 2 per cent only once. Third, even if oil prices stay over $US 50 per barrel for some time, it is highly unlikely that this would constitute a growth-interrupting "shock".

Finally, given Australia's record of economic reforms and growth in recent years and the potential the Coalition now has to institute further productivity-enhancing reforms, it is surprising indeed that the Treasurer is so pessimistic