Statement 2: Economic Outlook
This statement presents the economic forecasts that underlie the Budget estimates.
Recent natural disasters will reduce Australia's economic growth in the first half of 2011, but the negative macroeconomic impacts are expected to be temporary. Australia's medium‑term fundamentals remain strong, with the economy forecast to grow at an above‑trend rate in 2011‑12 and 2012‑13, supported by strong economic conditions in the region. Robust growth in emerging Asia has pushed Australia's terms of trade towards historical highs, underpinning an extremely strong outlook for resources investment and exports. Strong real GDP growth is expected to drive solid growth in jobs and reduce unemployment. With the unemployment rate already low, price and capacity pressures are likely to emerge. However, conditions will remain uneven across the economy, with the appreciation of the Australian dollar and legacy effects from the global financial crisis (GFC) weighing heavily on some sectors. The key risks to Australia's economic outlook arise from fragilities in the international economy, with recent events in Japan and rising world oil prices adding to existing concerns.
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