Budget Paper No.6 1997/98 Northern Territory Economy
Tabled Paper 3223
Tabled Papers for 7th Assembly 1994 - 1997; Tabled papers; ParliamentNT
1997-04-30
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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https://www.legislation.gov.au/Details/C2019C00042
https://hdl.handle.net/10070/289257
https://hdl.handle.net/10070/404114
Prices and Wages Price movements in the Territory are more responsive to national than to local factors. In contrast, wage outcomes in the Territory tend to show a greater degree of independence. Historically, Territory wages have been higher than the national average, although in recent years there has been some evidence of convergence. Prices The Australian economy has been decelerating since 1994 resulting in an easing of inflationary pressures. In the second half of 1996, the Reserve Bank of Australia (RBA) reduced official interest rates three times by a total of 1.5 percentage points. This move reflects the RBAs assessment that underlying inflation (a measure developed by Commonwealth Treasury that excludes the effects of interest rates and other items subject to seasonal and policy fluctuations) is within its target range of 2-3% and that the economy has capacity for higher growth. Even though the rate cuts are a response to low inflation, they have a significant effect on reducing inflationary expectations and can be expected to dampen price and wage movements. Prices are also affected by the exchange rate for the Australian dollar, the balance of economy-wide demand and supply and the cost of productive inputs. During 1996 the Australian dollar maintained a relatively high exchange rate. This generally supports price restraint as the cost of imports is kept low which places a competitive discipline on local producers. High inventory levels have diminished the ability of business to raise prices and wages growth has also eased throughout the year. The latest Consumer Price Index (CPI) figures for the December quarter 1996 recorded a fourth successive fall in the annual inflation rate. The quarterly increase of 0.2% was also the smallest increase since the December quarter 1993 and resulted in an annual inflation rate of 1.5% which is the lowest since the March quarter 1994. While Consumer Price Inflation (annual change) 0 2 4 6 8 1990 1992 1994 1996 8 Capitals Darwin % Source: ABS Cat. No. 6401.0 Figure 6.1 31