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No. 3

Treasury Economic Roundup: Winter 2001

The Winter 2001 edition of the Treasury Economic Roundup was released today and includes the articles listed below. The Roundup is available from Government Infoshops or through Treasury's internet home page: http://www.treasury.gov.au. Subscriptions are also available by contacting the Roundup Publication Officer, National Mailing and Marketing Pty. Ltd., on 02 6229 6044.

Economic Outlook

This article is a reprint of Statement 3, Economic Outlook, from Budget Paper No. 1: Budget Strategy and Outlook 2001-02.

Economic growth in Australia in 2001-02 is forecast to rebound quite strongly, driven by a turn around in residential construction. Employment growth is expected to be subdued with the unemployment rate averaging around 7 per cent, while inflation is forecast to decline and the current account deficit to be well below the average of the last decade. World growth is expected to weaken in 2001 to a little below historical averages, although there are significant downside risks.

A more productive Australia - policy and technology

This article is a reprint of Statement 4, A More Productive Australia - Policy and Technology, from Budget Paper No. 1: Budget Strategy and Outlook 2001-02.

There is mounting evidence that the exceptional lift in productivity growth in the United States economy in the late-1990s was largely the result of the productive diffusion of information and communication technology (ICT) throughout the economy. In Australia, a sound macroeconomic policy framework has encouraged competition and created a strong incentive to apply productivity-enhancing ICT advances in the Australian economy. This has created the potential for Australia to experience an extended period of strong productivity growth in coming years.

The growing dependence of East Asian economies on exports

East Asian economies have become more integrated with the world economy through increased trade and expanded exports of electronic goods. Many of these economies are being severely affected by the current global downturn.

Financial capital and taxation policy: the way forward

This paper was presented by Mr. Richard Wood (Budget Group) to a Seminar for Staff and Senior Students at the University of Newcastle on 8 June 2001.

The establishment of the joint ATO/Treasury Taxation of Financial Arrangements (TOFA) project was announced in the 1992-93 Budget following representations by industry concerning the uncertainty, complexity and incoherency of relevant tax legislation.

Extensive consultations with industry have been based on:

• 'Taxation of Financial Arrangements: A Consultative Document', 1993;

• 'Taxation of Financial Arrangements: An Issues Paper', 1996;

• 'A Platform for Consultation', February 1999, Chapters 5, 6 and 7; and

• 'A Tax System Redesigned', July 1999, Recommendations 6.8, 9.1 to 9.12, and 12.11.

The debt/equity tax borderline reform (developed as part of the TOFA project) has been introduced into Parliament with effect from 1 July 2001. Consultations on the remainder of the TOFA project will continue before any recommendations are prepared for Government consideration.Oto

Statistical Appendix

The statistical appendix includes charts and tables summarising the latest macroeconomic statistics.

CANBERRA, ACT
3 August 2001

Contact officer: Dr. Paul O'Mara
Domestic Economy Division
Telephone: (02) 6263 3780