Australian economy is coming up roses

THE short-term future looks rosy for Australia’s economy says BIS Shrapnel chief economist Frank Gelber.

Dr Gelber told a recent Economic Outlook briefing that Australia faced heady times for the next two years.

He said the Asian crisis had not killed Australia.

“There was a substantial decline in confidence last year,” Dr Gelber said.

“It will be the end of this year or early next year before we see a correction in business investment. It takes that long to work through the budgeting and planning process.”

Dr Gelber said labour productivity improved dramatically in the past three years.

“Productivity has been growing by 3 per cent per unit of labour per year. It’s usually 1.5 per cent per year. We saw a huge productivity gain in the mining sector and very strong initiatives in the finance sector.

“That’s why you can’t find a bank teller without queuing,” he joked.

Dr Gelber said increased productivity had helped keep inflation down which in turn kept interest rates down. And the fall of the Australian dollar put the country in a much stronger position.

Dr Gelber feels sentiment to Australia will be positive for the next two years.

“We’re going to have a great party with the Olympic Games, the new millennium and the centenary of Federation,” he said. “But we may be a little too popular for our own good. We should be thinking now about what happens when we have to do the washing up.

“I expect all the traditional things will come home to roost early in the next decade.”