The economy has rebounded strongly from its mid-2003 weakening, driven by private expenditure and an upturn in exports. Domestic demand may slow in 2004 and 2005, but the strengthening world economy and the breaking drought should boost exports and raise GDP growth, despite the strong Australian dollar. Although capacity utilisation is high and unemployment is at a record low, wage moderation, improved labour productivity and the currency appreciation should keep inflation under control. The favourable economic outlook should permit a more neutral setting of monetary policy, to lock in price stability. Fiscal policy should remain geared to preserving a small budget surplus, which would help to maintain financial market confidence and keep long-term interest rates in check...