Country Report Australia January 2010

Outlook for 2010-11

• The Labor prime minister, Kevin Rudd, will almost certainly win the next general election, given his popularity and the deep divisions within the opposition Liberal-National coalition.
• Mr Rudd could call an early general election over the blocking of legislation on carbon emissions by the Senate (the upper house of parliament), but he is likely to see out his term, which expires at the end of 2010.
• Occasional diplomatic disputes with China are likely, but it is doubtful that they will disrupt the bilateral trade relationship.
• The fiscal budget is expected to remain firmly in deficit in 2010-11, but economic recovery will bolster revenue collection and the government's stimulus spending is scheduled to be withdrawn in an orderly manner.
• The Reserve Bank of Australia (RBA, the central bank) will slowly raise its official cash rate (OCR) in 2010-11 to prevent inflation from accelerating as the economy recovers.
• The Economist Intelligence Unit expects Australia's economy to grow by 2% in 2010, up from 0.9% in 2009. Economic growth will accelerate again in 2011, to 2.5%, but will remain below its trend rate of recent years.

Monthly review

• Labor has opted to present again its climate change legislation to the Senate in February, when parliament resumes. The leader of the opposition Liberal-National coalition, Tony Abbott, is firmly against its passage.
• Mr Abbott has installed a shadow front bench that includes stalwarts from the government that was led by the previous prime minister, John Howard.
• The RBA lifted the OCR by 25 basis points to 3.75% in early December, the third increase in as many months.
• Economic growth slowed to 0.2% quarter on quarter in the third quarter of 2009, as net exports stripped 1.6 percentage points from growth. Year-on-year GDP growth rose only marginally, to 0.5%, from 0.4% in the second quarter.
• According to the Australian Bureau of Statistics, motor vehicle sales rose by 3.7% month on month in October, making a year-on-year increase of 3.3%.
• The labour market improved in November, when employment expanded by 31,200 jobs from the previous month, pulling down the unemployment rate to 5.7%, from 5.8% in October.
• The seasonally adjusted current-account deficit widened to A$16.2bn (US$13.5bn) in the third quarter of 2009, from A$13.1bn in the second quarter.

• Highlights
• Outlook for 2010-11: Domestic politics
• Outlook for 2010-11: International relations
• Outlook for 2010-11: Policy trends
• Outlook for 2010-11: Fiscal policy
• Outlook for 2010-11: Monetary policy
• Outlook for 2010-11: International assumptions
• Outlook for 2010-11: Economic growth
• Outlook for 2010-11: Inflation
• Outlook for 2010-11: Exchange rates
• Outlook for 2010-11: External sector
• Outlook for 2010-11: Forecast summary
• The political scene: Labor is biding its time
• The political scene: Mr Abbott chooses his shadow front bench
• The political scene: New South Wales has a new premier
• Economic policy: The RBA raises the official cash rate again
• Economic policy: Queensland is privatising assets
• Economic performance: The economy continued to grow
• Economic performance: Inflation remains moderate
• Economic performance: The current-account deficit continues to widen
• Data and charts: Annual data and forecast
• Data and charts: Quarterly data
• Data and charts: Monthly data
• Data and charts: Annual trends charts
• Data and charts: Monthly trends charts
• Data and charts: Comparative economic indicators
• Basic data
• Political structure