| BUSINESSWEEK ONLINE : DECEMBER 27, 1999 ISSUE | ||||||||
| ||||||||
 | ||||||||
| BUSINESS OUTLOOK
Australia: Good Times Signal Higher Interest Rates Strong growth in output, shrinking labor markets, and modest inflation are propelling the Australian economy through its ninth year of expansion. But with the good news comes the worrisome specter of higher interest rates in 2000. Real gross domestic product grew 1.6% in the third quarter, or 4.5% from a year ago. That follows a 4.1% yearly rise in the second quarter and marks the 10th consecutive quarter of growth over 4% (chart). Consumers are leading the way, thanks to a healthy job market, low interest rates, and rising wages. The unemployment rate in November dropped sharply, to 6.7% from October's 7.1%, the lowest in nine years. Jobs fell slightly in part-time work, but the number of full-time positions rose. The tighter labor markets are helping to boost wages, which grew 3% in the year ended in the third quarter. While that rate is not fast enough to worry policymakers at the Reserve Bank of Australia (RBA), wage growth is outpacing the 1.7% inflation rate. Household buying power is rising, and reports on holiday shopping look very good. Because strong domestic spending began at a time when weak commodity prices were hurting Aussie exports, Australia's current-account deficit has deteriorated rapidly. In the third quarter, it stood at 9.2 billion Australian dollars (U.S. $5.9 billion), a third larger than the gap was just a year earlier. Steadier commodity prices, along with the recoveries in neighboring Asian economies, brighten the outlook for Aussie exports in 2000. However, a curb on domestic demand--and thus imports--will most likely require further interest rate hikes by the RBA. The central bank began a round of tightening on Nov. 3 with a quarter-point hike in the overnight target rate, to 5%. That hike has helped to tone down consumer confidence a bit in the fourth quarter, though it remains historically high. Analysts already expect another hike as early as February as the RBA tries to quell spending at home. By JAMES C. COOPER & KATHLEEN MADIGAN _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
|  |
 | |
RELATED ITEMS Australia: Good Times Signal Higher Interest Rates CHART: The Aussie Economy Is Flying High INTERACT E-Mail to Business Week Online | |||
