Global, United States and Australian Economic Review & Forecasts

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The other indicators for the U.S. economy are shown in Figure 2.4. The main points from these indicators are:

- The consumer price index followed the real GDP pattern, with the CPI rising in the 1995 period. The bombing in Oklahoma, only the second major terrorist attack on U.S. soil, weakened the consumer confidence and thus increased the CPI. The increase in the CPI in 1998 due to the Asian slowdown did not affect consumer confidence in the U.S. as their economy was still performing relatively well.

- The unemployment rate has been decreased steadily over this period, with the average being approximately 6.9%, indicating that there was a net increase in jobs and growth in the economy.

- The inflationary indicator, the GDP deflator, has also dropped over the shown period, with an average rate of approximately 1.9%. However, it began to rise in 1999 and 2000, indicating a slowing down of the U.S. economy.

- The U.S. balance of payment of current account was steady in the early to middle parts of the 90’s but has blown out since 1997. Control for this will need to be regained, to help prevent a deeper recession being brought on.

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(Source: IMF World Economic Outlook, Table 8, 2001) (Source: IMF World Economic Outlook, Table 8, 2001)

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(Source: IMF World Economic Outlook, Table 28, 2001) (Source: IMF World Economic Outlook Table 4, 2001)

Figure 2.4 U.S. Economic Indicators

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The Australian Economy

The Australian economy has been more volatile than the global or United States economies for the period 1993-2000 as it is affected by both the U.S. and Asian economies. The growth in the Australian economy from 1993-2000 is shown in Figure 2.5. Although the average growth rate, over the shown period, of approximately 4.3% is higher than the average growth rate for the U.S. economy of just below 4%, there has been more positive and negative variation.

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(Source: IMF World Economic Outlook, Table 2, 2001)

Figure 2.5 Real GDP for Australia (1993-2000)

The Australian economy from 1993-2000 appears to have been largely affected by the fiscal policies of the ruling Federal Government. The Labour party, who generally place a higher emphasis on Government spending, being in power from 1993-1995 and the Liberal-National coalition, who generally undertake tighter fiscal policies, taking over from 1995 onwards.

The other indicators for the Australian economy are shown in Figure 2.6.[pic 12]

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(Source: ANZ Economic Outlook, Page 13, 2001) (Source: IMF World Economic Outlook, Table 8, 2001)

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(Source: IMF World Economic Outlook, Table 28, 2001) (Source: IMF World Economic Outlook, Table 4, 2001)

Figure 2.6 Australian Economic Indicators

The main points from the economic indicators are:

- The overall trend for the Australian consumer price index has been downwards, with the highest period in the last eight years being triggered by the slowdown in the U.S. economy in 1995. The upturn in 2000 can be attributed to the introduction of the G.S.T. and community concern that went with its implementation.

- The unemployment rate steadily decreased over the period, with an average value of 8.5%. The reduction indicated that the economy was growing with more jobs being created. The only flattening in the reduction in the unemployment rate was during the higher period of inflation from 1995-1997.

- The balance on the current account illustrates the effect of the government on the fiscal policy. On attaining office in 1995, the Liberal party sought to reduce the current account balance and Australia’s deficit. This reduced the balance of payments until 1997, when the next election in 1998 brought on more spending and an increased balance of payments. After the 1998 election, a further effort commenced to reduce the deficit by reducing the balance of payments. Due to the tight fiscal policy controls in 1999 and 2000, the balance of payments for Australia is under tighter control than the U.S. economy.

- The work to reduce the balance of payments and deficit has had an effect on the Australian inflation and GDP deflator rate. The deflator rate grew in the period of 1995-1996 when the Government was trying to reduce spending to improve the balance of payments. The increase in spending in 1998 then increase the balance of payments but also reduced the inflation rate to almost zero, before the deflator rate has increased again in the time of tighter fiscal policy in 1999 and 2000. The average inflation rate change is 1.5%, which is lower than for the U.S. economy.

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Five Year Economic Forecasts

The forecast for the next five years for the Global, United States and Australian economies is outlined in this section. The forecast for 2001 to 2005 has been added to the actual values for 1993 to 2000 to put the forecast into perspective with the past data.

Global Economic Forecast

The forecast for the growth in the world economy is shown in Figure 3.1.

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Figure 3.1 Forecast for Global GDP for 2001 – 2005

This forecast growth is lower than the forecast in the IMF World Economic Outlook (2000) and the ANZ Economic Outlook (2001) due to the commencement of a stronger slowdown in the world economy in 2001 and the political and financial effects of the terrorist attacks on New York and the Allied reprisal attacks. The global GDP is expected to slow with: the effects of the attacks on America; Japan’s financial problems, with the level of debt being carried by their banks being very high and urgently needing restructuring; a sharp downtown in the technology sector; and a slowdown in the German