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Budget Paper No.6 1997/98 Northern Territory Economy



Budget Paper No.6 1997/98 Northern Territory Economy

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Tabled Paper 3223


Tabled Papers for 7th Assembly 1994 - 1997; Tabled papers; ParliamentNT




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pay relatively high wages such as mining and the public sector. As the economy has matured and diversified, much of the expansion has been in lower paying industries such as hospitality and tourism. This has resulted in a decline in the significance of the high wage sectors and consequently a move in average Territory earnings towards national levels. Growth in real average weekly ordinary time earnings, which exclude overtime and therefore provide a truer indication of the price of labour, has generally been lower in the Territory since mid-1993. Prices and Wages Outlook Inflation is expected to continue decreasing in the short term as the generally slower wages growth takes effect. In the long term, domestic inflation should remain low, reflecting the emphasis given by all major economies to restrain inflation. Presently, RBA is closely watching the ACTU living wage claim, which it fears could add 1.6 percentage points to wages growth, and hence add to inflationary pressures. Market views on the likelihood of further interest rate cuts are mixed. Inflation is already at the lower end of the RBAs preferred range and if the economy remains subdued, some additional stimulus may be required. Alternatively, strong wages growth could accelerate inflation beyond that which the RBA considers appropriate. In global terms, Australian real interest rates on average are higher than the countries of the Organisation for Economic Cooperation and Development (OECD), although they are below those of many of the developing Asian economies. The new Commonwealth Workplace Relations Act 1996 has been progressively coming into effect since December 1996. It allows much greater flexibility in wage agreements, for example, trading conditions for pay increases. Consequently, the outcome of wage negotiations is now more uncertain than previously, although while unemployment remains high and the economy remains sluggish, wages growth will be kept in check. National Fiscal Outlook parameters published by Commonwealth Treasury project a national inflation rate for 1996-97 of 1.5% increasing to 1.75% in 1997-98 and 2.5% thereafter. Wages growth in 1996-97 is forecast at 4.5%, decreasing to 4.0% in 1997-98 and 3.5% thereafter. Prices and Wages 34