According to the Budget, 2008-09 will be the sort of soft landing the country’s economic establishment aimed for and utterly missed in the late 1980s.

Real GDP growth is forecast to fall to 2.75%, led by household investment – expected to soften – and business investment, which will continue to grow at Paul Keating-type gangbuster rates, while Australia’s terms of trade will grow at an historic 16% in 2008-09. The only risk appears to be the assumption that recovery from the drought will generate substantial farm income growth, but exports are forecast to grow 6%.

The weaker economy will see lower employment growth, with unemployment rising to 4.75%, moderated by a slight fall in the participation rate, and a slight fall in both headline and underlying inflation back to 3.25%, benefitting from steady wage growth of 4.4%, the same as this year.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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