Reality check time as Christmas approaches

As we enter into the quarter of the year when retail spending becomes the dominant driver of economic growth, with Christmas spending and holiday plans predominant, it is appropriate to look at the past three months and review our position here in the Australian economy.

The economy has defied all expectations for some time. Figures released in early September indicated growth for the twelve months ending June 1999 was 4.1 per cent. Inflation over the same period remained well below 2 per cent.

The labour market has surprised a number of commentators. While unemployment grew slightly from 7 per cent to 7.2 per cent, the outlook and the Job Ads series continue to be very positive.

At the same time wage growth has been contained to an annual growth rate of 3.2 per cent.

A domestically strong economy can cause imports to rise and this has certainly been the case in Australia.

Housing finance demand is up about

15 per cent over the past twelve months.

Some of this demand may be related to the increased building activity we are seeing at present to get in ahead of GST-induced price rises from 1 July 2000.

The Australian dollar added 2 per cent to its value against the US dollar over the month of September.

Since that time it has continued its rise, tied to the phenomenal rise in the gold price.

The question that has most commentators guessing at this stage is whether the gold rally is sustainable for the longer term.

The general consensus seems to be that it is unlikely the market can continue to sustain the price much above what it is now.

The lack of supply of gold may tell against the market in the long run but that is a story yet to unfold.

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