Economic Outlook

After contracting by 0.6% in the December quarter 2000, the Australian economy rebounded by 1.1% in the March quarter of this year to officially avoid a technical recession. The quarterly growth was assisted by a jump in household consumption, with the strength particularly evident in retail trade and communication services. Also adding to an improved economic picture was a rebound in housing construction after the dramatic slump experienced in the second half of 2000, and a resurgence in business investment (albeit from low levels). However, annual growth of the economy remains weak compared to recent history.

Exports remain reasonably subdued, but a sharp drop in imports suggests that the weak Australian dollar may be forcing consumers to substitute some imported products with locally produced items. Looking ahead, export outcomes are likely to remain weak in the near term as the international economy struggles to regain its footing. However, the medium-term prospects for a recovery in offshore trading conditions have significantly improved, thanks to the stimulatory environment created by the United States Federal Reserve which has lowered interest rates six times in 2001 to their current level of 3.75%.