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Robust economic growth is set to continue. New capacity coming on stream in the resource sector will support exports and business investment will pick up. Growth of wages and prices will rise gradually, while the unemployment rate will edge lower. Output growth will moderate slightly in 2020 as capacity constraints tighten, export-market growth slows and households become less willing to draw down savings to fuel consumption.
Monetary policy tightening will be required as the pick-up in wages and prices gathers pace. Risks from the housing market and high household indebtedness warrant continued vigilance. The government is projected to reach a budget surplus in 2019, giving sufficient room to support activity and protect the incomes of vulnerable groups in the event of an unexpected downturn.
1. Terms of trade is the ratio between export and import prices. The dotted line represents the 20-year average of the terms of trade.
2. Household liabilities as percentage of net household disposable income.
Source: OECD Economic Outlook 104 database; and OECD Analytical House Price database.
Economic Survey of Australia (survey page)