It is a very rare event for the OECD to make a comment about the economy of a member country that does not have at least a wink and a nod of approval from that country’s official representative. More often than not the commentary and forecasts are simply the work of the country’s Treasury/Finance department so they rarely contain any surprises.
So it is with the comments on Australia from the OECD’s Economic Outlook – Analysis and Forecasts released tonight. “Australia can be expected to keep reaping benefits from the mining boom,” it says at the beginning of its Australia forecast in words that echoed Wayne Swan’s recent budget speech. So did these:
Despite sharp sectoral disparities, economic growth should be around potential in 2012 and 2013. Mining expansion will continue, but some other sectors are having to adjust to the high level of the exchange rate and raise their productivity, which can be expected to weigh on the labour market. Faster fiscal consolidation will also weigh somewhat on demand.
Restoring fiscal leeway while macroeconomic conditions are still favourable, and the terms of trade high, is welcome. In the absence of inflationary pressures, the accommodating monetary stance which accompanies this budget-tightening should help limit the risk of weakening employment.
Only in the concluding sentence was the opportunity taken to stray a little and issue a mild warning to government ministers getting apprehensive about the continuing loss of manufacturing jobs. “The authorities should preserve the economy’s flexibility,” the OECD outlook warned, “and facilitate the adjustments made necessary by the changes underway, rather than impeding those changes by, for example, subsidising certain sectors.”
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