Statement 2: Economic Outlook
This statement presents the economic forecasts that underlie the Budget estimates.
Australia's economic fundamentals are strong and the outlook remains favourable, with the Australian economy expected to continue outperforming most of the developed world.
Global financial market sentiment has improved noticeably since late 2012, although global economic conditions remain challenging, particularly in the major advanced economies. The global economy is also undergoing enormous structural change, as the weight of global economic activity increasingly shifts towards Asia.
Against the backdrop of a fragile global recovery, the Australian economy is expected to undergo two large and important transitions over the forecast period. Following the largest investment boom in Australia's history, the resources boom will transition away from the investment phase towards exceptional growth in production and exports. More broadly, the Australian economy will transition to non‑resources drivers of growth.
Australia starts this transition from a position of impressive resilience, with some of the strongest economic fundamentals in the world. Economic growth is solid, the unemployment rate is low, inflation is well contained, and public finances are strong. However, the unusual combination of a persistently high Australian dollar and lower terms of trade is having an acute and enduring effect on profits and prices growth across the economy, and this has weighed heavily on nominal GDP growth and government revenue.
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