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Budget Paper No5 Northern Territory Economy 1998/99



Budget Paper No5 Northern Territory Economy 1998/99

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Tabled Paper 382


Tabled papers for 8th Assembly 1997 - 2001; Tabled papers; ParliamentNT




Tabled by Michael Reed


Made available by the Legislative Assembly of the Northern Territory under Standing Order 240. Where copyright subsists with a third party it remains with the original owner and permission may be required to reuse the material.




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average Territory earnings towards national levels. PRICES AND WAGES OUTLOOK Inflation is expected to continue to remain low in the short term. National Fiscal Outlook parameters published by the Commonwealth Treasury project a national underlying inflation rate for 1997-98 of 1.5%, increasing to 2.5% per annum thereafter (for 1998-99 through to 2000-01). In the longer term, domestic inflation should remain low. A result of the RBAs inflation targeting has been to re-establish a climate of low inflation and low inflationary expectations. This is in part due to restrained wages growth through the predominance of enterprise bargaining, with its greater emphasis on productivity as a basis for wage growth. The Industrial Relations Commissions April 1997 decision to reduce the ACTUs living wage bid for a $20 per week safety net rise to a $10 per week wage rise added an element of restraint to wage pressures and hence inflationary pressures. However, this was based on the RBAs assessment that the national economy was somewhat sluggish. This has since proved to have underrated the strength of growth in domestic demand. Stage two of the ACTUs current living wage bid for a $20-60 per week wage rise, if successful , would place signif icant upwards pressure on inflation. National Fiscal Outlook parameters forecast wages growth in 1997-98 of 4.25%, decreasing to 4.0% in 1998-99, and 3.5% for the following two years. Market views on the likelihood of further interest rate cuts are negative. In November 1997, RBA Governor Mr Ian Macfarlane stated that if the Reserve expected underlying inflation to move above 2.0%, it would not lower official interest rates. Most major public and private sector forecasts predict that underlying inflation will move above 2.0% over 1998-99, with economists generally agreeing that the current monetary policy easing cycle is at an end. However, the Asian crisis remains somewhat of a wildcard. If it deepens, it may adversely affect domestic demand and exports, and place downwards pressure on inflation. 32 Northern Territory Economy

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