Australian economy remains strong despite global headwinds

The fundamentals of the Australian economy remain strong despite deteriorating international conditions, according to Treasurer Wayne Swan's Mid-Year Economic and Fiscal Outlook (MYEFO) released today.

The fiscal outlook for 2012-13 reveals that real GDP growth is forecast at three per cent, which will likely continue into 2013-14. Government estimates of taxes on wages and consumption also remain solid, highlighting the "healthy fundamentals" of the domestic economy.

"While global headwinds, a high dollar and changing consumer behaviour are weighing on some sectors, the Australian economy is expected to outperform every major advanced economy this year and next, with growth underpinned by strong investment, strong growth in export volumes and solid growth in consumption," said the Treasurer in a media statement.

Economic indicators are solid, with the unemployment rate expected to remain low at 5.5 per cent over the next two years, compared with the high rates of unemployment in the developed world. Inflation is also forecast to remain within the Reserve Bank's target band, in light of the budget returning to surplus this financial year as planned.

However, while these key indicators remain strong, negative news coming out of Europe and the subdued recovery in the United States have had a flow-on effect on Australia's economy, driving a write-down in tax receipts of almost $22 billion that were mostly derived from company tax and resource rent taxes.

"The weaker global outlook and lower than expected commodity prices, along with the general easing of price pressures in the economy, are again slowing the recovery in tax revenue.

"Since the start of the global financial crisis, tax receipts have been written down by a total of almost $160 billion."

View the MYEFO at www.budget.gov.au.

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