The economy grew very rapidly in the first half of the year, adding to an already positive output gap and inflation pressures. However, the pace of activity is now starting to slow, as higher interest rates damp domestic demand and the effects of exchange rate appreciation continue to spread through the economy. Labour shortages persist and real wage growth may accelerate, although capacity constraints will be eased through high rates of investment. The economy is on track for a soft landing, and successive moves taken to tighten monetary policy during 2004 should prove to be sufficient. Additional fiscal stimulus at this point in the cycle would be unhelpful and would anyway need to be offset by higher interest rates in order to bring the economy back onto a sustainable growth path. ...