Country Report Australia October 1996 Main report

Outlook for 1997-98: Economic reforms will remain on track--

The Liberal/National government, despite its inexperience, has taken a sophisticated approach to piloting legislation through the federal parliament. Details of the more controversial aspects of the 1996/97 budget were released early, so de- fusing criticism. The minister for industrial relations, Peter Reith, famous in opposition for his intransigence, has also showed a surprisingly conciliatory approach in negotiations with the Australian Democrats, in attempting to formulate an industrial relations bill acceptable to the Senate. At the apex, the prime minister, John Howard, appears to have preserved his reputation for honesty.

--as the government remains dominant in parliament

The EIU expects that the government will be able to keep pushing through economic reforms over the next two years, although there will be occasional setbacks. It will remain dominant in the lower house of the federal parliament, the House of Representatives; its majority of 40 seats over all other parties combined gives some leeway for disgruntled National MPs to rebel on certain issues, and means that the opposition Labor members must be reconciled to a long hard slog, concentrating on criticising detailed aspects of government policies, rather than hoping to engineer any great change in the parliamentary balance of power. In the upper house, the Senate, the government's position is also starting to look better. The government will never be able to claim an automatic majority in this house, in the current parliament, but even if its relationship with the Australian Democrats turns sour (the Democrats' leader, Cheryl Kernot, will have no compunction about putting party before country), the defection of Mat Colston from the Labor Party in August (he is now an independent) will make it easier to push legislation through the Senate. Mr Colston and his fellow independent, Brian Harradine, have shown themselves broadly supportive of deficit reduction, although less keen on certain measures to achieve this, notably the sale of the state telecommunications monopoly, Telstra.

Forecast summary 1995(a) 1996(b) 1997(b) 1998(b) Real GDP growth© (%) 2.9 3.6 3.4 3.6 Manufacturing production (%) 1.1 1.5 2.0 2.0 Consumer price inflation (%) 4.6 3.1 2.5 2.5 Current-account balance (US$ bn) -19.2 -15.7 -16.5 -18.4 Average exchange rate (A$:US$) 1.35 1.28 1.30 1.30 (a) Actual. (b) EIU forecasts. © Expenditure measure.

© 1996 The Economist lntelligence Unit Ltd. All rights reserved
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